Following the conclusion of the 2024 elections, the Narendra Modi-led National Democratic Alliance (NDA) is set to continue its governance for the third consecutive term. With the continuity of the government, specific sectors are anticipated to experience favourable conditions. In this article, we shall delve into the sectors to focus on for the next 5 years under Modi 3.0.

How does a repeated term of the government help the industries?

When a government repeats a term, it is expected that the regulatory frameworks, tax policies, and other business-related decisions laid down by the government will stay intact. Furthermore, one can ascertain that the benefits the government has placed in the form of subsidies, tax incentives, and other forms of assistance that help the industry thrive will also remain intact.

Prior to the 2024 election, the NDA had rolled out its interim budget where it laid down budgets and goals to attain in various industries.  With the NDA government retaining the position for another term, we can determine that the industries emphasised during previous budgets are more likely to be prioritised.

Let us now look at some of the sectors which the NDA government has prioritised and have the potential to grow in the next five years 

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Sectors to focus for the next 5 years under Modi 3.0

Defence sector

India’s military forces are considered one of the strongest military forces in the world. In this sector, the top three largest market segments comprise of military fixed wing, naval vessels and surface combatants, and missiles and missile defence systems.

According to the Global Power Index, India’s defence sector ranks fourth in terms of firepower with a score of 0.0979 (0.0 being the perfect score). By 2025, the Indian government planned a defence output target of $25 billion (including $5 billion in exports by 2025).  

With the country ranking among the top military forces, it is also one of the top spenders towards the defence segment. During the recent interim budget, the government has proposed a total budget outlay of Rs. 6.21 lakh crore which accounts for 13.04% of the total budget and a 4.72% increase over the previous budget,

Below is a list of some of the stocks from the Defence sector:

CompanyMarket capitalisation (In Crores)
Bharat Dynamics Ltd₹ 56,955
Hindustan Aeronautics Ltd₹ 3,56,341
Bharat Electronics Ltd₹ 2,28,577
Mazagon Dock Shipbuilders Ltd₹ 80,675
Cochin Shipyard Ltd₹ 57,182

Railway sector

The Indian railway system is an important part of the Indian economy. The Indian railways cover the entire nation by spreading across thousands of kilometres making it the fourth largest in the world after the US, China, and Russia.

As of FY24, the Indian Railways has loaded 1,434.03 MT of freight from April to February increasing its revenue by Rs. 6,468 crore from revenue of Rs.1,60,158 crore recorded in FY23.

In 2022-23, Indian railways earned 69% of their revenue from freight and 24% from passenger traffic. The remaining 7% was derived from several sources, including parcel delivery, coaching receipts, and platform ticket sales.

In the recent budget announcement, the government revealed plans to implement three major economic railway corridor programs. These are (i) energy, mineral, and cement corridors, (ii) port connectivity corridors, and (iii) high-traffic density corridors. Additionally, forty thousand normal rail bogies will be upgraded to Vande Bharat standards to enhance passenger safety and comfort.

During the interim budget of February 2024, the government proposed a budget allocation of Rs. 2.55 crores for the Ministry of Railways.

Below is a list of some of the stocks from the Railway sector:

CompanyMarket capitalisation (In Crores)
Rail Vikas Nigam Ltd₹ 86,852
Titagarh Rail Systems Ltd₹ 21,677
Indian Railway Finance Corporation Ltd₹ 2,31,077
Jupiter Wagons Ltd₹ 28,036
Texmaco Rail & Engineering Ltd₹ 8,662

Road Transport and Highway sector 

India, as a developing country, considers roads to be a crucial component of its development. The nation boasts the world’s second-largest road network, spanning 6.7 million kilometres. This extensive road network facilitates the transportation of 64.5% of all goods and is utilized by 90% of India’s total passenger traffic for commuting.

In recent years, road transportation has steadily increased, improving connectivity between cities, towns, and villages in the country. National highway construction in India grew at a rate of 5.3% CAGR between FY14 and FY23. In FY23, the Ministry of Road Transport and Highways constructed national highways spanning 10,331 kilometres.

As of November FY24, India has constructed a total of 5,248 km of National Highways. Furthermore, a total of 202 national highway projects worth Rs. 79,789 crore are at the implementation stage in the country and are 6,270 km in length.

During the Interim Budget of 2024, the Government of India has allocated Rs. 2.78 lakh crores to the Ministry of Road Transport and Highways.

Below is a list of some of the stocks from the Road Transport and Highway sector:

CompanyMarket capitalisation (In Crores)
IRB Infrastructure Developers Ltd₹ 40,075
KNR Constructions Ltd₹ 9,796
Dilip Buildcon Ltd₹ 8,015
PNC Infratech Ltd₹ 12,219
H.G. Infra Engineering Ltd₹ 11,889

Chemicals and Fertilisers sector

India’s chemical industry is extremely diversified covering more than 80,000 commercial products. The sector can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, polymers, petrochemicals and fertilisers. 

India currently ranks third as the largest chemical producer in Asia and sixth globally. This sector contributes to 7% of India’s GDP and was valued at US$ 220 billion in 2022. It is projected to grow to US$ 300 billion by 2025 and to a staggering US$ 1 trillion by 2040.

The demand for chemicals is expected to grow by 9% annually by 2025. By 2030, the chemical industry is anticipated to contribute US$ 383 billion to India’s GDP.

During the Interim Budget of 2024, the Government of India has allocated Rs 1.68 lakh crores to the Ministry of Power.

Below is a list of some of the stocks from the Chemicals and Fertilisers sector:

CompanyMarket capitalisation (In Crores)
Coromandel International Ltd₹ 45,072
Deepak Nitrite Ltd₹ 34,190
UPL Ltd₹ 42,961
P I Industries Ltd₹ 57,766
GHCL Ltd₹ 5,316

Green Energy Sector

As India continues to progress towards becoming a developed nation, the demand for power is expected to surge more than in any other country in the world. Therefore, it is crucial to focus on this sector during Modi 3.0. 

According to REN21 Renewables 2023, India ranks 4th globally in Renewable Energy Installed Capacity (including Large Hydro), 4th in Wind Power capacity, and 5th in Solar Power capacity.

In the interim budget for 2024-25, the government has introduced new measures to promote sustainable energy and electric mobility, aligning with its green energy commitments and goal to achieve net zero by 2070. 

Two major announcements include plans to solarize 10 million households through rooftop solar installations and provide viability gap funding (VGF) for offshore wind projects with a combined capacity of 1,000 MW. Additionally, new schemes have been unveiled for the bioenergy segment.

During the Interim Budget of 2024, the Government of India has allocated Rs 20,502 crores to the Ministry of Power.

Below is a list of some of the stocks from the Green energy sector:

CompanyMarket capitalisation (In Crores)
Adani Green Energy Ltd₹ 2,86,479
NHPC Ltd₹ 1,00,259
K.P. Energy Ltd₹ 2,643
Waaree Renewables Technologies Ltd₹ 20,454
Suzlon Energy Ltd₹ 73,838

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Conclusion

The article concludes the discussion on the sectors to focus on for the next 5 years under Modi 3.0. The government has laid a solid foundation for India’s economic development and progress by ensuring policy continuity and a commitment to promoting these crucial sectors. However, it’s important to note that market sentiments have significantly influenced the recent months. Therefore, it’s crucial to focus on both the valuations of the company and the sectors before making any investment decisions. 

Written By Aaron Vas

By utilizing the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


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