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Last Updated : Jan 31, 2018 05:06 PM IST | Source: Moneycontrol.com

Budget 2018: Top 20 stocks to watch on the Budget Day across these 4 sectors

The Union Budget 2018-2019 on increased spending on affordable housing, infrastructure, and rural economy along with no major changes in the direct taxation structure would be sufficient to sustain momentum in the markets, suggest experts.

Kshitij Anand @kshanand

All eyes are on the Budget 2018 which is expected to strike a fine balance between credible fiscal math and strike the right balance between populism and fiscal prudence.

The government might not be able to meet the fiscal deficit target for FY18 but analysts’ expect the government to revert to fiscal consolidation roadmap with a target of 3.2 percent for 2018-19.

Fiscal slippage in 2017-2018 with a revised figure for the gross fiscal deficit at around 3.5 percent as against the estimate of 3.2 percent given in the budget. However, the government is likely to revert to fiscal consolidation roadmap with a target of 3.2 percent for 2018-2019.

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The Union Budget 2018-2019 on increased spending on affordable housing, infrastructure, and rural economy along with no major changes in the direct taxation structure would be sufficient to sustain momentum in the markets, suggest experts.

“Given the expected focus areas and stated policy priorities of the government, the sectors and companies that clearly stand to gain from the Union Budget 2018-2019 are: consumer (rural demand-driven and consumer discretionary), construction companies, retail and defence companies,” said a Sharekhan report.

The preferred Budget picks for the domestic brokerage firm include names like Bharat Electronics, Ashok Leyland, Arvind, Sadhbhav Engineering, Birla Corp and Emami.

JK Jain, head of equity research at Karvy Stock Broking expect the government to focus on infrastructure and increase the spending in that segment to bolster building of proper roads, power generation, and boost irrigation.

“Other sectors which we will be eyeing would be Consumer Durables as a reduction in GST on household items will be a positive for this industry and also Logistics would benefit indirectly if spending on Infrastructure goes up,” he said.

We have collated a list of top 20 stocks which will remain in focus on the Budget Day across these 5 sectors:

Sector: Automobile

Stocks to track: M&M, Hero MotoCorp, TVS Motor Company, M&M, Ashok Leyland, Ashok Leyland, Bosch

Demand recovery is underway across segments, after experiencing multiple shocks such as demonetization, BS3 to BS4 transition, and GST, among others over the last 12 months.

“We do not expect any changes in indirect taxes. However, we expect higher allocation toward rural-focused schemes,” Motilal Oswal said in a report. Focus on rural markets could place the 2-wheeler industry back on the growth path.

This, coupled with the benefit of normal monsoon and 7th Pay Commission, could drive 2W.

Volume CAGR of 10-12 percent over FY17-19E. “Stocks which are likely to remain in focus include stocks like Hero MotoCorp, TVS Motor Company, M&M,” said the Motilal Oswal report.

The brokerage firm also expects the introduction of a scrappage scheme, which would incentivize scrapping of trucks older than 10 years. This move would be positive for stocks like Ashok Leyland, and Bosch.

Sector: Capital Goods & Infrastructure

Stocks: Bharat Electronics, L&T, Bharat Forge, Sadbhav, Ashok Buildcon, Cummins India, KNR Construction, Siemens, ABB India, Crompton Greaves

Companies in the defense sector await an increase in orders from the government post the thrust toward "Make in India". FY18 budgetary allocation at Rs 865 billion for capital spending.

The analyst expects an increase in allocation towards capital spending in the budget. An increase in budgeted spending would be positive for companies as it implies higher ordering and execution.

The news will be positive for companies like Bharat Electronics, L&T, Bharat Forge, Motilal Oswal said in a report.

Railway Budget will not be presented as a different Budget but analysts’ expect the government to increase budgetary support and, in turn, spending by the Indian Railways.

Motilal Oswal expects the allocation to increase by 10 percent for FY19.

The Government is taking steps to decongest the existing network, improve the safety of passengers and return the railways to profitability. It will be positive for companies like L&T, Siemens, ABB, Crompton Greaves, and KEC International.

Increased budgetary support for the road is expected to help maintain continuity in ordering and execution. Motilal Oswal expects an increase of 10-15% in budgetary allocation. Stocks which are likely to benefit the most include names like L&T, Sadbhav Engineering, KNR Construction, Ashok Buildcon, and Cummins India.

Sector: Agriculture

Stocks to Watch: Dhanuka Agritech, PI Industries, Chambal Fertilisers, Coromandel International, Kaveri Seeds

Brokerage houses expect the short-term farm loan limit to be increased to Rs 5 lakh from Rs 3 lakh currently which would be positive for stocks like Dhanuka Agritech, PI Industries, and Kaveri Seeds.

The recommendations are that Natural gas should also be brought under GST and will attract 5 percent GST rate which would be positive for fertilizer manufacturers such as Chambal Fertilizers and Coromandel International, said a Sharekhan report.

There are also talks about reforms which are targeted at improving farm income/farm yields such as electronic linkage of mandi's under e-NAM, higher MSPs and the likely increase in rural allocations.

The move is likely to be positive for agri-chem companies such as Dhanuka Agritech, Insecticides, and PI Industries.

Sector: Cement

Stocks in focus: Grasim, UltraTech, Shree Cement, The Ramco Cements and Mangalam Cement

Analysts are expecting to levy basic customs duty on cement imports in India or import duties on raw material such as coal, petcoke, limestone, and gypsum be abolished. The move will be positive for companies like Grasim, UltraTech, Shree Cement, The Ramco Cements and Mangalam Cement, said a Sharekhan report.

Higher allocation in the infrastructure sector especially roads, ports, and metros will also be positive for the cement sector.

Disclaimer: The views and investment tips expressed by the investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Jan 31, 2018 08:31 am
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