PM Narendra Modi govt can raise capital expenditure by 1.2% in budget, says Credit Suisse

The Prime Minister Narendra Modi-led government can raise capital expenditure by at least 1.2 per cent of GDP in the budget for 2015-16, even as the market worries about fiscal stress in FY15, said Credit Suisse.

The global financial services provider said that the government was pocketing a large part of gains from the global slump in oil prices and can spend to generate growth.

Credit Suisse added that spending on national highways, rural roads, railways, and rural and urban housing was likely in the budget for the coming financial year.

Regarding stocks, the Swiss company said it preferred cement, paints and construction stocks as higher spending on roads and housing should drive demand.

Credit Suisse upgraded UltraTech Cement and Asian Paints to "outperform" from "neutral" and said that Larsen & Toubro (L&T) should reverse underperformance since elections.

The financial services major also raises its target price for Axis Bank to Rs 680 from Rs 593 on improved loan growth.

(Reuters)