The Indian market witnessed a sharp surge in January ahead of the big event – Budget 2020 – pushing the S&P BSE Sensex beyond 42,000, and Nifty50 above 12,400 levels.
The expectations, which are powering the rally, are that Budget 2020 will be tilted towards stimulating growth. The measures expected to be rolled out include cut in personal taxes, and a possible cut in long term capital gains tax (LTCG).
The expectation is running high from the upcoming Union Budget to provide stimulus to revive the economy, and lay down the path for India to achieve $5-trillion GDP by 2024.
Most economists and analysts see the government missing out on the fiscal deficit target by at least 50 bps but that is mostly factored in by markets, but anything more than that could be fatal for the sentiment on the Street.
“A 50-60 bps slippage in the fiscal deficit target for FY20 is now the consensus. We believe markets are already building in the same. But anything beyond that is not a great outcome. We believe the market is focussing more on FY21,” Ritu Arora – CEO & CIO, Allianz Investment Management Singapore Pte Ltd told Moneycontrol.
“We hope to see FDI norms being relaxed meaningfully in sectors such as insurance. This will bring in large pools of capital to India as well as help in further developing and deepening the financial sector, which is essential for India to reach its 5 trillion dollar goal by 2025,” she said.
In Union Budget 2020-21, most analysts on D-Street expect the government to continue with its policy push to revive economic growth and demand by focusing on boosting disposable income and that is one of the prime reasons why we are seeing a rally in the small & midcap stocks.
In terms of sectors, the usual beneficiaries include infrastructure, agriculture, rural economy, automobiles, Make-in-India thrust, more on ease of doing business, employment generation thrust could gain focus from the Budget, suggest experts.
Other sectors could be defence, banking, auto, infrastructure and consumption which will be the key sectors to watch out for in Budget 2020.
“Given the expectations that the government would take measures to ease the demand-side concerns, we expect consumption both staple (FMCG) and discretionary (consumer durable goods, automobile, etc.) to hog the limelight for the upcoming Budget 2020,” Pankaj Bobade, Fundamental Research Head, Axis Securities Ltd told Moneycontrol.
“Infrastructure creation is expected to be another focus for the government given the need for better infrastructure; hence, infrastructure plays viz., capital goods, cement, metals, pipes and infrastructure companies viz., EPC players, road construction companies etc would also enjoy demand in the near term,” he said.
Investment in railway infrastructure, mass rapid transport is also going to be keenly watched out for in the upcoming budget.
We have collated a list of companies from different brokerage firms that are expected to benefit from Budget proposals:
Sharekhan picked 12 companies, which it thinks will be in focus in the run-up to the Union Budget and have the potential to give good returns in the long term.
Antique Stock Broking:
We expect increased allocation to various rural-centric schemes, along with strong Rabi season may help revive rural demand.
These measures if announced may accelerate earnings largely led by higher volume growth for all consumption linked stocks. Likely key beneficiaries are in Auto (M&M, TVS Motors, Bajaj Auto), consumer durable/electrical (Crompton Consumer, Voltas), Paints and other household linked stocks (Asian Paints), Consumer staples (HUL, Colgate, Dabur) and retail (Avenue Supermarket).
We have projected a 10% growth in FY21 capital expenditure including expenditure over road, highway and railways (in line with our estimate of 10% FY21 nominal GDP) because of the ongoing fiscal constraint.
Likely key beneficiaries are L&T, NTPC, UltraTech Cement, Adani Ports, Siemens, ConCor, Bharat Electronics, Honeywell Automation, Gujarat Gas, Solar Ind., KEC, Timken, APL Apollo, Birla Corp, BEML and KNR Construction.
In the backdrop of the current slowdown we believe that fiscal slippage is necessary and will go a long way in boosting growth given that India doesn’t have a twin balance sheet problem like 2013, said the brokerage firm.
Expert: Umesh Mehta, Head of Research, Samco Securities Ltd.
Investors can look at high dividend-yielding stocks such as ONGC, Hindustan Zinc, Vedanta which might pick up the pace if there is some relief on the personal tax front.
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