Budget 2020: Add these auto stocks to your portfolio to make the most of reforms

Besides, the brokerage expects reduction in customs duty on key components used in electric vehicles (EVs) which are not manufactured in India and keep it in the range of 10 percent.

The government has been putting efforts towards clean energy and electric vehicles is one of their main projects towards their goal of a better environment, experts point out.

"The government has already made many announcements for the E-vehicle sector like cut in GST rates from 12 percent to 5 percent, but we are expecting further announcements to make E-vehicle more viable. The industry is demanding a cut in GST rates for raw material as well to make E-vehicle cost-effective while there could be major announcements for better infrastructure for E-vehicles," said Amit Gupta, Co-Founder and CEO, TradingBells.

Society of Indian Automobile Manufacturers (SIAM) has proposed abolition of import duty on lithium-ion battery cells which would encourage local manufacturing of battery packs and enable a reduction in overall electric vehicle costs.

Brokerage firm Antique Stock Broking also expects some scrappage policy for the industry to reduce pollution emission and increase vehicle sales which would be beneficial for everyone in the sector including auto ancillary companies.

Automakers are moving towards manufacturing electric vehicles in large numbers as a range of electric vehicles are being launched and more are in the pipeline.

While the technological shit in the automobile industry is inevitable, the larger question is whether our market is ready to absorb it as we still lack a suitable infrastructure to move to electric vehicles.

Due to this, the government's action on addressing lower charging stations and higher cost of ownership would be the key area to be watched in the Budget 2020.

Experts point out there is a greater need to incentivise the buying and selling of EVs as they are the future of the automobile market.

"We believe electrification of 3-wheelers and 2- wheelers by FY23 and FY25 will further garner some positive commentary in the Budget," said Vinod Nair, Head of Research at Geojit Financial Services.

"Currently, the government has outlaid Rs 20,000 crore under the FAME (Faster adoption of Manufacturing of Electric Vehicle) 1 & 2 to boost the number of electric vehicles in India. In addition, there is an exemption in income tax and indirect tax to set up mega-manufacturing plants such as semiconductor fabrication (FAB), solar photovoltaic cells, lithium storage batteries and solar electric charging infrastructure," said Nair.

Stocks that are likely to gain:

Brokerage: Reliance Securities-

Escorts (Target: Rs 925), Ashok Leyland (Target: Rs 111), Mahindra & Mahindra (Target: Rs 665), Tata Motors (Target: Rs 205), Hero MotoCorp (Target: Rs 3,050), JK Tyre (Target: Rs 105), Apollo Tyre (Target: Rs 215).

Brokerage: Antique Broking-

Tata Motors, Eicher, Mahindra & Mahindra, Ashok Leyland, Bajaj Auto, Escorts, Hero MotoCorp, TVS, Maruti.

Expert: Amit Gupta, Co-Founder and CEO, TradingBells-

Minda industries (Target: Rs 550), Subros (Target: Rs 380), Sundram fastner (Target: Rs 590), Ashok Leyland (Target: Rs 105), Bajaj Auto (Target: Rs 3,350), Jamna Auto (Target: Rs 60), Amara Raja batteries (Target: Rs 950) and Endurance technologies (Target: Rs 1,450).

Expert: Shrikant Chouhan, Senior Vice-President, Equity Technical Research, Kotak Securities-

Ashok Leyland (Target: Rs 95), Escorts (Target: Rs 1,030), Mahindra & Mahindra (Target: Rs 820), Tata Motors (Target: Rs 200).

Expert: Vinod Nair, Head of Research at Geojit Financial Services-

Exide, Amara Raja, Minda Industries, WABCO, Escort, Bajaj Auto, Hero, Maruti, and Ashok Leyland from the automobile sector.

Disclaimer: The views and investment tips expressed by 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.