Top Stock Picks: Budget 2026 announcements can give a boost to these Capital Goods names

Analysts are largely positive on the Union Budget 2026-27, as they cited a pick-up in government capital expenditure, led by higher allocations for railways, defence and roads.

The capex push is expected to boost capital goods and infrastructure stocks, putting HAL, L&T, Siemens Energy, CG Power, among other stocks in focus.

Based on the announcements made by Finance Minister Nirmala Sitharaman, these Capital Goods and Defence stocks feature as the top picks from these four brokerage firms. Here's a look at those recommendations:

Jefferies

Jefferies said while the FY26 Budget narrative was a visible shift to consumer focus compared to 2021-25, the FY27 estimated Budget has surprised with road and rail allocations rising between 8% - 11% compared to nil in the previous Budget's estimate and defence allocation increasing 18%.

The finance ministry's new initiatives allocation, which largely remains underutilised, has reduced by 94%, it said.

The overall capex is up 12% and excluding the finance ministry and BSNL, infusion is up 13%, Jefferies said.

Power and defence sectors stand out, and the Jefferies' top picks within this space are Siemens Energy, Hitachi Energy, HAL, BEL, KEI Industries and L&T.

Citi

The brokerage said the key highlight for India's industrials and infrastructure is the pick-up in capex allocation growth in three of the largest capex spenders -- rail, road and defence -- compared to trends witnessed in the FY26 estimates, with defence expectedly witnessing  the fastest allocation growth.

From a medium-term perspective, announcements around new rail infra (high-speed corridors and a dedicated freight corridor), steps to promote the data center ecosystem and steps to scale up manufacturing in multiple end markets (such as electronics) should also provide the order inflow opportunities for various E&C and electrical equipment providers, the note said

CLSA

A deep dive into Budget 2026-27 points to a thrust into infrastructure capex, with a 50 basis point rise in capex-to-GDP led by a significant focus on defence, the brokerage said.

"Overall, the FY27 budget estimate capex, including capex grants, was ₹13.9 lakh crore, up 16% from the FY26 revised estimates. However, 'real' capex analysts points to a 16% growth, indicating a capex pick-up ahead," CLSA wrote.

CLSA said the important bit was a kick-start of ₹20,000 crore in projects for seven new bullet trains and a dedicated freight corridor, it said.

The defence capex growth of 17% from the previous year should reassure the market, CLSA said, adding that there is no constraint for this and it depends on project delivery, it added.

The Centre's off-Budget funding could help beat targets, the brokerage added.

It reiterated its "outperform" rating on builders L&T, HAL, BHEL and NCC as orders / execution recovers in 2026, which could surprise the markets positively.

Nomura

The brokerage said defence stands out in Budget 2026 with robust capex growth at ₹1.8 lakh crore.

Road, railway and defence ministries remain the primary drives of the FY27 budgeted estimate capex, according to Nomura.

This steady growth in capex is likely to augur well for the ordering and revenue potential for the players in the capex-linked sectors, Nomura said.

It said the data center capacity addition in India got a major boost and it expects 2.2 lakh investment over FY26-39.

This is likely to act as a significant positive for CG Power and Cummins India, given their sizeable presence in data centers segment.

HAL is Nomura's top pick in defence, while CG Power and GE Vernova T&D India are its top picks in the capital goods space.

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