India’s infrastructure is expected to witness a substantial boost in the coming years, backed by the government’s core sector push. The Centre had allocated a record Rs.3.69 lakh crore to infrastructure in the previous Budget. A lot of other factors, too, have come together, making it a propitious time for the sector. Moody’s has just delivered the good news of a rating upgrade, which will, in turn, favourably impact the rating of public sector enterprises. With bank recapitalisation in the works as well, we see infrastructure as a sector to go long on.
Utilities have always been considered as an option that enables investors to capture higher-than-average dividend. Also, utilities are low-beta stocks and provide relatively stable growth. Given the current state of development and policy environment, Powergrid Corporation of India provides a superior combination of growth and stability. I see this as the best utility stock which will see a sustained appreciation over the next four to five years.
The government seems determined to pursue a path of investment-led growth with infrastructure as the key area. The current regime intends to provide 24x7 reliable power supply and is working towards policies to enable that. Further, the Ujwal Discom Assurance Yojana scheme has reduced losses in state-run utilities and improved efficiencies. Transmission and distribution sectors had accumulated losses of about 4% of GDP and 22% of all outstanding bank debt was in the power sect