Government spending is driving India’s capital expenditure cycle in 2026, with power transmission companies recording ber performance, rising new orders, and margin expansion, while non-electrical industrial companies continue to grow at a slower pace, according to a report by Nuvama Institutional Equities.
High-voltage transmission and distribution companies have reported significant gains. The report states that new orders in the segment increased 33 percent year-on-year, while sales rose 39 percent. Profit margins expanded to 20.3 percent, up 5.40 percent compared with the previous year.
The data indicate sustained demand in the sector. Government investments in renewable energy and expansion of transmission networks are directly supporting order inflows and strengthening order books.
The government has outlined a plan to spend ₹9.15 lakh crore in the transmission sector between 2022 and 2032. During this period, 8 to 10 major high-voltage power transmission corridors are to be developed. Equipment work for three of these corridors has already been finalised.
According to the report, new order inflows may accelerate further by 2027, with demand expected to remain elevated through 2030.
In the Union Budget for FY2027, the government has proposed capital expenditure of ₹12.2 lakh crore, 12 percent higher than earlier estimates. The allocation will be directed toward infrastructure, energy, railways, and urban development.
The Reserve Bank of India has reported that factory capacity utilisation has reached 77.7 percent. Historically, when utilisation remains above 75 percent for an extended period, private companies begin planning new investments.
In contrast, non-electrical industrial companies have recorded year-on-year sales growth of around 9 percent. Profit margins in this segment have declined to 11.7 percent.
However, new orders for these companies increased 26 percent, driven by traditional sectors such as metals and oil and gas, as well as emerging segments including data centres, electric vehicles, batteries, electronics, and semiconductors.
Despite the increase in order inflows, investment in setting up traditional factories and expanding manufacturing capacity remains limited, as private companies await sustained demand visibility.
The report states that government measures including tax cuts, GST reforms, incentive schemes, and easing interest rates could support private investment over time, provided economic conditions remain stable and demand continues to improve.
For now, the acceleration in capital expenditure remains concentrated in select sectors, particularly power and transmission.
Nuvama has identified BHEL, Hitachi Energy, GVT and D, and CG Power as its top picks, citing strength in thermal equipment and power transmission businesses. The report notes that these companies have b order books and improving margins, supported by participation in government projects, while broad-based private sector investment has yet to gather pace.
