Interim Budget provides the fiscal stimulus of close to one trillion rupees through direct cash benefits to small and marginal farmers and tax sops for the middle class.
Impact of the Budget on Indian indices
We strongly believe this budget is middle class and farmers oriented budget. Finance Minister clearly target middle-income class and farmers to get their votes in the upcoming general election.
No income-tax for people earning up to Rs 5 lakh is a big boost. Rs 6,000 per year to farmers having land up to 2 hectares could have long term impact.
The market reacted to the fiscal policies taken by the government in this budget. Indices can drag in short term but at the end, the market has reacted positively in the hope of re-election of this government. In the coming months, we believe indices could touch new highs.
Nifty, which is around 10,900, if breaks the upper range of 11,000, it can easily move up to 11,200 where it could face resistance. It also depends on the US and other markets sentiment. In the near short term, buying on dips will be the strategy. However, on the bottom side, if Nifty breaks 10,600 we could easily see 10,500-10,400.
Stocks to benefit post budget
Post budget, stocks that are hot are Dabur, Hindustan Unilever, Marico, TVS Motor, Hero Honda, Bajaj Auto, Jubilant Food. These stocks are consumer-oriented stocks that are the biggest beneficiary from the tax rebate given by the Finance Minister.
The two-wheeler segments will comparatively be getting more benefit from the announcement as the rebate is for people having taxable income below Rs 5 lakh. There is no change in slab rate for people earning more.
On the other hand, the real estate sector will be benefited by this budget as the FM has given a boost to affordable housing projects. Companies that develop affordable housing are DLF, Soba Developers, Parsvnath Developers, etc. Companies that finance these projects and housing finance companies will also benefit from this budget.
Stocks to be negatively impacted
Stocks and sectors that will be losers post the Budget are banking, finance, pharmacy and IT. Finance Minister did not touch LTCG and STT in the Budget, disappointing stocks like Geojit, Edelweiss, IIFL.
NBFCs are also at a disadvantage. Stocks like DHFL, Bharatfin, Bajaj Finance, M&M Finance were expecting a stimulus.
The author is Head of Research, CapitalAim.
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