Trending Infrastructure Stocks on NSE and BSE

Trending Infrastructure Stocks on NSE and BSE

In India, the infrastructure sector is often considered a powerhouse as it drives economic growth across various industries. As the nation prioritises infrastructure projects to meet its growing needs, investing in infrastructure shares emerges as a lucrative avenue for investors. These shares offer the potential for earning substantial returns.

Let us explore the top infrastructure shares listed on NSE and BSE and learn how to strategically pick them.

What do you mean by infrastructure stocks

Infrastructure stocks are shares of companies that build, manage, and operate important structures and systems that help communities and businesses. These structures include things like roads, bridges, power plants, and communication networks.

Investing in infrastructure stocks means investing in companies that play a key role in keeping our society and economy running smoothly.

From the investment point of view, infrastructure assets are often an attractive bid for long-term investors as they have:

• Stable cash flows
• Long asset lifespans, and
• Relatively low correlation with economic cycles

Also read: Differences between shares and stocks

What sectors come under infrastructure stocks in India

Sectors	Meaning	Common examples
Energy infrastructure	Companies that are involved in the exploration, production, refining, transportation, and distribution of energy resources such as oil, natural gas, and renewable energy.	Oil and gas pipeline-laying companies Power generation and transmission companies Renewable energy developers
Transportation infrastructure	Entities engaged in the construction, operation, and maintenance of transportation networks that facilitate the movement of goods and people.	Airports Seaports Railways Toll roads Bridges Tunnels
Communication infrastructure	Businesses involved in the development and operation of communication networks, including wired and wireless telecommunications infrastructure.	Telecom tower companies Broadband service providers Satellite communication providers
Social infrastructure	Companies that build facilities which support social well-being and community development.	Hospitals Schools Prisons Affordable housing projects

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List of 5 trending infrastructure stocks in India

Below is a list of top infrastructure stocks in India that have shown significant:

• Market capitalisation
• P/E ratios, and
• Returns over the past years

Infra stocks India

• Larsen & Toubro (L&T): L&T is a giant in the Indian infrastructure sector and boasts an incredible track record in constructing landmarks and buildings across the country.
• IRB Infrastructure Developers Ltd: IRB Infrastructure Developers Ltd. specialises in developing and operating road and highway projects. The company has carved a niche in the country’s transport infrastructure sector thanks to its expertise in highway and toll road construction.
• Ircon Intl: Ircon International is a leading player in the railway construction sector. The company has played a vital role in railway projects, along with highways, bridges, and tunnels.
• RITES: RITES Ltd. is renowned for its consulting services in transport infrastructure. The company leverages its expertise in engineering and project management to drive advancements in the country’s transport systems.
• HFCL (Himachal Futuristic Communications Ltd): Standing at the forefront of India's telecommunication infrastructure revolution, HFCL offers cutting-edge solutions in telecom equipment, broadband, and fibre optics.
• Engineers India: Engineers India Limited (EIL), a consultancy and engineering company plying its trade in petrochemicals, petroleum, and pipelines, plays a vital role in India’s industrial infrastructure development.

How to pick and invest in the best infra stocks

Identifying trending infrastructure stocks on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) involves an assessment of various factors. Let us understand this process through an easy step-by-step guide:

Step I: Identify top-performing infrastructure stocks

• Research top infrastructure stocks that are currently trending or performing well on both NSE and BSE.
• To do so, you can utilise:
  • Financial news websites
  • Stock screeners, and
  • Market analysis reports

Step II: Perform fundamental analysis

Financial statements	Key ratios	Growth prospects
Evaluate the financial health of selected stocks by analysing their: Balance sheets Income statements, and Cash flow statements	Compare key financial ratios such as: Price-to-earnings (P/E) ratio Price-to-book (P/B) ratio Debt-to-equity ratio, and Return on equity (ROE)	Assess the growth potential of infrastructure stocks based on factors such as: Order book growth Project pipelines, and Government infrastructure spending plans

Step III: Conduct technical analysis

Discover price trends	Identify support and resistance levels
Analyse price trends and determine entry & exit points by using technical indicators such as: Moving averages Relative strength index (RSI), and Candlestick charts/ patterns	Find important levels where the price of a stock tends to: Stop falling (support) or Stop rising (resistance) These levels help predict whether the price will change direction or keep moving in the same direction.

Step IV: Evaluate market sentiment and news

• Stay updated on:
  • Industry news
  • Government infrastructure project announcements, and
  • Macroeconomic factors impacting the infrastructure sector
• Gauge market sentiment by considering:
  • Analyst reports
  • Recommendations, and
  • Price targets

Step V: Perform risk assessment

• Identify and evaluate potential risks associated with investing in infrastructure stocks.
• These risks commonly relate to:
  • Project delays
  • Regulatory risks
  • Geopolitical factors, and
  • Economic downturns.

• To reduce your overall portfolio risk, consider diversifying your portfolio by investing in a mix of different infrastructure stocks in India.

Step VI: Invest

• Lastly, you can consider investing in the infrastructure stocks after evaluating the risk-reward profile of each infrastructure stock
• You can calculate it based on your:
  • Investment objectives
  • Time horizon, and
  • Risk tolerance
• Furthermore, decide how much you want to invest in different infrastructure stocks in your investment portfolio.

Additional read: Share market

What are some popular risk management techniques

Making investments in infrastructure projects comes with several inherent risks, such as:

• Project delays
• Cost overruns
• Regulatory hurdles, and
• Geopolitical uncertainties

This creates the need to adopt appropriate risk management measures to limit potential losses and maintain the standard overall portfolio return. Let us explore some popular risk management methods.

Method I: Perform diversification

You can spread out your investments in infrastructure stocks using two ways:

Sectoral diversification

• Reduce sector-specific risks by spreading investments across different infrastructure sectors such as:
  • Energy
  • Transportation
  • Utilities, and
  • Communication

Stock diversification

• Invest in a diversified portfolio of infrastructure stocks in India.
• This will help you mitigate:
  • Individual company risks and
  • Exposure to adverse events

Method II: Maintain a long-term perspective

• Adopt a long-term investment approach and perform a fundamental analysis of companies':
  • Financial health
  • Growth prospects, and
  • Industry dynamics
• Be patient and stay invested for the long term
• Allow your investments in infrastructure stocks to grow and compound over time

Method III: Adopt hedging strategies

Options hedging

• Consider using options strategies such as:
  • Protective puts or
  • Covered calls
• This technique will provide a hedge against downside risk.

Futures contracts

• Utilise futures contracts to hedge against adverse price movements in infrastructure stocks.

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Conclusion

Infrastructure stocks in India, such as Larsen & Toubro (L&T), RITES, HFCL, and many more, offer investors significant opportunities for substantial returns in terms of capital appreciation and dividends. However, investors must exercise due diligence and carefully pick the best infra stocks after performing fundamental and technical analysis. Also, risk management is pivotal in limiting potential losses and maintaining the overall portfolio returns.