Decoding Budget by smallcase managers

Thrust on Infra

The thrust on Infra will bring India, post Asian Financial Crisis and Global Financial Crisis China like growth to India over the next 2 decades.

Infra thrust will also ensure reduced turnaround time for manufacturing, sustainable long-term growth, reduce cost of transportation, ensure geographically inclusive growth.

Logistic-park, use of technology, reduction in documentation under PM Gatishakti is a huge positive for the logistics companies.

Upskilling will also benefit India to present its case for China plus one and PLI push as India has availability of a large population for labour at competitive wages. This is positive for manufacturers who are going for capex under PLI.

The guarantee cover expansion through ECLGS with CGTMSE scheme allocation is a positive, as India would need more of SME and MSME businesses.

The pandemic has impacted many small and medium businesses severely. Focus on inclusive growth is welcome. These businesses are the backbone for the bigger businesses.

 
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The budget so far looks highly positive and forward-looking with a focus on Infra, Health, Skilling of people and empowering the pandemic affected MSME and SME sectors. The focus looks clearly on growth over the next 25 years.

The Government looks focused on using ideas to bring efficiencies, use technology, and look at an inclusive sustainable growth increasing focus on clean energy

Steps towards Digital India

Open platform for national digital health with universal access to health, digital records will ensure the much-needed reach for the healthcare and pharma access across geographies. This is an addition to Ayushmaan Bharat and will ensure further penetration for sectors like insurance, healthcare and pharma.

Allocation of 48000 cr for housing and a huge thrust on Infra is a positive for steel, cement and infra developers. The cement and Steel sectors are already in Capex mode. This focus will also ensure a higher GDP multiplier and job creation.

Digitation of land records is a step towards standardization of the registration process. This can impact the Benami properties and cash economy.

Data centres given infra status is a positive for Adani Enterprises and about to be listed ESDS

Fintech, Digitization, Digital Currency, Digital Payments Network, Digital Records- These keywords emphasized in the budget is a huge positive for the startups and IT companies

Digital currency is a step towards the adaptability of blockchain. The government has already ensured blockchain usage for payment companies to tokenize credit card details. We will see many use cases of blockchain come into existence over the next few years.

Bringing the virtual digital assets (including cryptocurrencies) into the tax regime with no set-offs and TDS will result in a reduction in speculative investments in the asset class. However, we believe that blockchain will be a business and wealth creation opportunity over the coming years.

Green India

Promoting a shift of use of public transport in urban areas, increased focus on EV, battery swapping policy, inter-operability will enhance focus on reduction in pollution impact, improve transit, reduce the cost of transportation and will be positive for current account deficit.

Unblended fuel shall attract an additional excise duty of Rs. 2- This is a positive for Ethanol producing companies

Focusing on renewables, clean energy, and local manufacturing of solar modules and other equipment will reduce the cost of energy, reduce pollution and reduce the import bill for crude oil. Positive for Adani Enterprises

Green Bonds, clean energy, sustainability, Electric Vehicles, solar, charging infrastructure- these keywords are a huge positive for ESG theme for investing. The stocks rated higher on ESG parameters will continue to generate alpha over the next financial year.

5G and spectrum auctions will ensure higher revenues for the Government and will be hugely positive for the start-up ecosystem in India. This along with internet inclusion related announcements is a positive for the incumbent telecom operators.

AatmaNirbhar Bharat in Defence enhances the focus on defence R&D, private participation in Defence. We have already seen some of the incumbent listed companies getting export orders for defence. This is also a positive for the current account deficit.

Capping the surcharge on long term capital gains of all listed and unlisted stocks at 15% is a positive for the startups and investors in the space.

Not increasing the capital gains tax on the listed equities comes as a relief for the markets and will ensure continuity of FPI flows into Indian markets.

The Budget 2022 is clearly focused on the long term growth of the Indian economy with a thrust on Capex, infrastructure, sustainability, clean energy, technology, skill development and job creation. Reducing the current account deficit and attracting Capex and investments will be a huge positive for the Indian economy which is positioning itself as a contender for China plus one. FM has struck all the right cords considering inflation and lack of fiscal room for the Government in this budget. This budget is a huge positive for the markets as there were no negative surprises and is going to ensure continuity of attractiveness of the Indian economy for the FPI investors.

Sonam Srivastava, Founder and CEO, Wright Research

Capex Booster

This is a Capex boosting budget which is prudent in other expenditures as the FM looks to contain the fiscal spending while enhancing growth. As expected in the election year, there is an increased focus on welfare schemes and agriculture. However, for India to keep up cyclical recovery, the government needs to focus on infrastructure. The FM has increased the Capex investment target by 20% to 7.5 lac crore and announced critical investments and policies for infrastructure development via railways, metro systems, highways primarily through the PM Gati Shakti initiative. Railway and Logistics linked stocks, Capital Goods, Cement, and Real Estate will gain with this.

FM has focused on Fintech instead of Banking, Electric Vehicles instead of Autos, and Edtech instead of Education which has brought back focus to the new-age innovative sectors. Moreover, FM has kept an increasing focus on digitization, leading to gain for the platform companies and fintechs. FM has also given some relief to the pandemic hit hospitality sector. The budget has tried to contain crypto investments by increasing taxation.

The budget also announced healthcare, education, banking, and urban & rural development policies to decrease compliance burden through digitization and increase education and skilling.

 
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Amit Kumar Gupta, Portfolio Manager, Adroit Financial

Positive Takeaways

1. 1. The government conspicuously accepts the role of facilitator in investment, providing the lead role to the private sector. The government capex (up 9 percent over FY22RE) is mostly focused on four facilitating sectors – Roads, Railways, Communication and defence. The rest has been left to the private entrepreneurs with a promise of supporting and transparent policy regime.


2.  2. The government appears willing to be a part of the global digital transition. Initiative to increase the use of digital technologies in key sectors like education, health, logistics, and agriculture is a good omen. Infrastructure status to data centres is a step in the right direction.


3. 3. The initiatives like digital education platforms, health registry, and documents registry could potentially bring a meaningful difference to many lives. India may be running 10-12 years behind in adopting digital as a way of life and governance, but hopefully no more delays will happen and the proposals will be implemented quickly.


4. 4. Recognition of the animation, visual effects, gaming, and comic (AVGC) sector as a high potential employment opportunity for youth; introduction of digital currency; and recognition of virtual digital assets (VDAs) like cryptocurrencies and NFTs as legitimate assets, demonstrate the change in bureaucratic mindset.


5. 5. Both the Budget and Economic Survey have overwhelmingly emphasized the need to promote clean energy. Incentives for solar panel manufacturing, national battery swapping policy, differential duty for blended fuel, mandatory co-firing of biomass pellets in thermal plants etc. are some key initiatives announced in this budget.

The finance minister may not have answered the wishes of many people. They can see it as a key negative takeaway of the budget. For me, the key negative is the lack of transparency. Not mentioning “end of bonus stripping”; comparing FY23BE capital expenditure with FY22BE instead of FY22RE are a couple of examples that may hurt the investors’ sentiments tomorrow morning.

 
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As an equity investor, we will find our pockets of growth from the budget. It aimed to reduce the duty on imports on certain raw materials to ease the higher prices like chemicals, stainless steel etc. It is always said that any individual should focus on their strengths. The key idea of the budget was to focus on India’s strengths from both domestic and export perspectives and be set towards growth.

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