Top Down #1: Capex Upcycle
19th June 2025
The Top-Down Series is a new initiative we have undertaken to make investors understand how they can distill the macro picture into action.
Investing with a top-down approach means starting at the macroeconomic level—identifying the big-picture trends—and then drilling down into the most promising sectors and stocks.
#1 Capex Upcycle
What Is a Capex Cycle?
A capex cycle refers to the ebb and flow of corporate and government spending on fixed assets—factories, power plants, roads, data centers, etc. It typically follows four stages:
Why India’s Capex Upcycle Matters Now?
Policy thrust: Governments are accelerating infrastructure monetisation and green-energy targets, unlocking private capital.
Corporate balance sheets: Strong cash flows in power, telecom and manufacturing mean Indian companies can self-fund much of their expansion.
Global supply chains: Multinationals are diversifying out of China, boosting India’s manufacturing and logistics capex.
According to Crisil, India will channel nearly ₹17.5 lakh crore into renewables, roads and realty over FY26–27. S&P projects corporate capex to double to $850 billion by 2030. This coordinated wave of spending signals the Expansion phase of the capex cycle—an ideal backdrop for top-down investment.
Five Sectors for India’s Next Capex Wave
Source: Fortune India
1. Renewable Power Generation
Dominant share: Power generation alone is projected to absorb nearly 28 percent of all corporate capex through 2030, with renewables forming the lion’s share of that bucket.
Massive capacity additions: In FY26 and FY27, India plans to add about 75 GW of green energy capacity—with storage-linked “hybrid” projects accounting for roughly 37 percent of the new buildout—fueling both carbon targets and reliable 24×7 supply.
Monetization & private participation: As utilities and project owners unlock value via asset-monetization routes, fresh equity and debt will flow into clean-energy players, making this the single biggest capex theme.
Source: Financial Express
2. Road & Highway Infrastructure
Pre-pandemic highs: The National Highways Authority of India (NHAI) is on track to award around 6,000 km of new projects per year—levels last seen before COVID.
Growing hybrid funding: Proceeds from toll-road monetisation are set to account for nearly 18 percent of NHAI’s funds in the next two years (up from 14 percent earlier), drawing institutional capital into proven cash-flow assets.
Long runway: With traffic volumes still below potential and ambitious corridor expansions in the pipeline, roadbuilders and EPC contractors stand to benefit for years to come.
3. Transmission & Grid Expansion
Critical enabler: As renewables surge, timely grid upgrades are essential. Transmission capex is expected to make up roughly 10 percent of India Inc.’s total investment over the next half-decade.
System resilience: Strengthening inter-regional links, adding high-voltage direct-current corridors and building hybrid charging points all play into a sustained capex cycle for utilities and equipment suppliers.
Policy tailwinds: Regulatory push for open-access networks and faster tariff approvals will help clear project bottlenecks and accelerate spend.
4. Real Estate & Construction Materials
Revenue growth: Developers’ top-line is forecast to climb at 10–12 percent annually in FY26–27, underpinned by robust housing demand and healthier land-monetization strategies.
Debt discipline: Strong operating cash flows in residential and commercial segments have kept leverage under control, paving the way for fresh launches.
Cement’s role: While cement accounts for around 5 percent of total capex in the broader corporate universe, its pivotal role in both infrastructure and housing makes it a proxy for construction-cycle strength.
5. Core Energy & Mobility (Oil & Gas | Airlines)
Oil & Gas: Upstream, refining and pipeline expansions are slated to absorb about 10 percent of capex through 2030, as India secures energy self-reliance and adds petrochemical capacity.
Aviation: Carriers led by IndiGo and Air India plan to invest an estimated $75–100 billion in new aircraft over the next decade—triple their current fleet size—to meet surging passenger demand.
Leverage mitigation: Much of this spend will be lease-financed, helping airlines manage balance-sheet impact while modernizing fleets.
Source: Upstox
With policymakers and corporates channeling record funds into power, roads, grids, property and core energy & mobility, these five sectors offer both scale and policy support. For investors seeking exposure to India’s capex upcycle, focusing on high-quality names within these themes can capture the growth and structural tailwinds driving the economy forward.
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