The consensus seems to be that you may need to make some adjustments to your portfolio post Budget.
Every proposal that Finance Minister Nirmala Sitharaman announced on Monday will have long-term repercussions and some stocks are better positioned to benefit from them, analysts said.
“The stock market can come to terms with slightly higher cost of capital, which will be offset by faster growth momentum and continued foreign portfolio flows. The government also looks firm in its intent to form an ARC for bad loans, support domestic manufacturing through PLI schemes and custom duty corrections and privatise certain PSUs and monetise land assets – all of which are pro-efficiency signals,” said Amar Ambani, Senior President and Head of Research for Institutional Equities at YES Securities.
Analysts at IIFL Securities picked ICICI Bank, ITC, L&T, Dabur, SBI Life, ICICI Lombard, HPCL, Deepak Nitrite, Quess Corp, JK Lakshmi Cement, Sudarshan Chemical and HG Infra Engg as the biggest beneficiaries of this Budget and expect some of these stocks to deliver up to 34 per cent returns in a year’s time.
Other potential winners from different sectors because of various policy moves include:
- Fertilisers: Chambal Fertilisers, Coromandel International, Navin Fluorine, Rashtriya Chemicals, Dhanuka Agritech, Rallis India, PI Industries and UPL could emerge the biggest beneficiaries of the broader focus on agriculture credit, irrigation and marketing of agriculture produce in the Budgets, said Phillip Capital.
- Auto: While most brokerages believe there was not much in the Budget for passenger vehicle makers, some feel commercial vehicle makers stand to gain from the higher capex for infrastructure and the new scrappage policy. HDFC Securities is betting on Tata Motors and Ashok Leyland. It said Maruti Suzuki and Hero Motocorp could also benefit from an increase in agri credit.
- Banks: Phillip Capital said increased allocation for capital expenditure, thrust on roads and highway infrastructure along with setting up of an asset reconstruction company bode well for large banks like ICICI Bank, Axis Bank, HDFC Bank and SBI. HDFC Securities is banking on Bank of Baroda, PNB, Canara Bank, Union Bank and Indian Bank as they are in line to get capital from the government.
- NBFCs: M&M Financial Services, Sundaram Finance, AU SFB and Shriram Transport Finance stand to gain from the vehicle scrappage policy while Shriram City Union Finance and Cholamandalam Investment & Finance are likely to gain from the extension of SARFESI Act.
- HFCs: LIC Housing Finance, HDFC, Repco Home Finance and CanFin Homes will emerge winners of the affordable-housing tax incentives, said brokerages. The government has extended the eligibility period for the claim of additional deduction of interest worth Rs 150,000, for loans taken for purchasing affordable houses up to March 31, 2022.
- Capital goods: ABB Power Products, Voltamp Transformer, GE Power and CG Power are set to gain from increased outlay for powering India while L&T, JKumar Infra, KEC, BEML and Siemens will emerge beneficiaries of increased outlay for metro projects. At the same time JMC Projects, KSB, Thermax and VA Tech Wabag will gain from higher allocation towards the Jal Jeevan Mission, said YES Securities.
- Cement: UltraTech Cement and Birla Corp are top pick as they will gain from increased focus on the infra sector. Start Cement will gain from the government’s increased focus in the Northeast.
- Consumer discretionary: A number of customs duty changes will be positive for Whirlpool, Havells, Hitachi, Titan, Thangamayil, Polycab, Finolex, Dixon Tech, Crompton, Surya Roshni and Bajaj Electric but negative for Arvind, Vardhman and Welspun India.
- FMCG: No hike in taxes on cigarettes will work in favour of ITC; at the same time some custom duty tweaks means HUL, Godrej Consumer, Britannia and Nestle stand to lose.
- Infra: RVNL, Rites and Ircon International are top pick from railway sector while road contractors like PNC Infra, NCC, KNR Construction, Adani Ports and SEZs, ITD Cementation, Ashoka Buildcon and Ahluwalia Contracts stand to gain from increased outlay for roads and highways and smart cities.
- Logistics: Increased focus on developing freight corridors will put focus on stocks like Concor, Shipping Corporation, Gateway Distriparks, Gateway Rail, Transport Corporation of India and VRL Logistics.
- Exchanges: HDFC Securities sees MCX to emerge as the winner as the government has planned to set up a gold exchange regulated by Sebi.
- Mutual funds and insurers: Asset managers such as HDFC AMC, Motilal Oswal, Nippon Life AMC, and UTI AMC will gain from discontinuation of tax exemption of capital gains from ULIPs. At the same time, ICICI Prudential may lose due to higher exposure to high-ticket size ULIPs. Max Life Insurance and SBI Life Insurance may also see some negative impact.
- Oil & Gas: The Budget was mostly neutral for the sector but GAIL, Gujarat State Petronet and Petronet LNG are set to gain as 100 more districts will be added in the next three years to the City Gas Distribution network, said analysts at HDFC Securities.
- Pharma: There is not much for listed companies except names like Cadila, Dr Reddy’s and Aurobindo Pharma will benefit from provision of Rs 35,000 crore for Covid-19 vaccines as they are in the process of developing one.
- Real estate: Analysts believe Kolte Patil, Prestige Estates, Sobha and Brigade Enterprises will gain from tax holiday for affordable housing projects.
- Speciality chemical: Phillip Capital is banking on SRF to gain from some custom duty changes in caprolactam. Apart from them Century Enka and JCT may also see some positive moves due to this.