The brokerage house Jefferies has flagged a major shift in India’s capex cycle, noting that even though government spending weakened in October, certain industrial and defence companies continue to enjoy strong visibility.
In its latest report, the firm highlights how softer central government capex and underutilisation by the Department of Economic Affairs are being offset by steady momentum in railways, roads and a sharp surge in defence allocations.
Jefferies’ analysis places companies such as Siemens Energy, Hindustan Aeronautics, Hitachi, Larsen & Toubro (L&T) and KEI Industries at the centre of this capex cycle.
Jefferies on Capex trend: Key sectors to watch
Jefferies highlighted that central government capex fell 28% year-on-year in October 2025. However, year-to-date spending is still up thirty-two percent, much higher than the Budget Estimate growth expectation of seven percent. The brokerage pointed out in its report, “Oct capex declines; defence up 47% YoY.”
A major drag comes from lower utilisation by the Department of Economic Affairs. Jefferies noted that “DEA spend down 57% YoY YTD – likely to follow the FY25 trend of being largely unutilised.”
Railways and roads maintain their pace
Despite a weak October print, railways and roads are progressing faster than estimated earlier. Jefferies pointed out that year-to-date rail capex is up 4%, while road capex is higher by 20%.
According to the report, “64-65% capex of FY26 BE has been achieved till date for road and rail and indicates targets should be met by year-end.”
Defence stands out with strong spending momentum
One of the strongest trends this year has been defence spending. Jefferies pointed that “Defence capex is up 68% YoY YTD; tracking well ahead of 13% FY26 Budget Estimates growth.” Much of this is linked to investments in aircraft, aero-engines, land systems, electronic warfare equipment and ammunition.
The report also highlighted the possibility of higher allocations ahead, quoting the ministry’s view and adding, “We remain constructive on the space.”
Jefferies on key Defence and power stocks to watch
Jefferies has issued target prices for several key companies. The brokerage has maintained a Buy rating on Larsen & Toubro (L&T) with a target price of Rs 4,715, implying an upside of 17%.
Hindustan Aeronautics (HAL) also carries a Buy call with a target of Rs 6,220, offering the highest upside of 38% among the large names.
Bharat Electronics (BEL) has a Buy rating and a target of Rs 510, signalling a potential upside of 23%.
Jefferies has also reiterated Buy on Cummins India with a target of Rs 5,120 and an upside of 14%, while Siemens Energy has a Buy call with a target of Rs 4,000 and upside of 25%. For Siemens, the brokerage has set a target of Rs 3,895 with an upside estimate of 16%.
Hitachi Energy also features with a Buy rating and a target of Rs 25,000, offering a 10% upside.
Among mid-sized names, Jefferies has a Buy rating on KEI Industries with a target of Rs 4,855 (upside 16%), Thermax with a target of Rs 3,880 (upside 33%), Afcons Infrastructure with a target of Rs 500 (upside 20%), and Data Patterns with a target of Rs 3,710 (upside 28%).
The brokerage noted in its report that “defence and power standout on capex visibility; company specific triggers also exist.”