The market will remain polarized in favour of consumption, IT, BFSI and oil and gas. Experts advise stock-specific approach with a focus on fundamentally strong companies with visibility of cash flows and good corporate governance.
“Budget for FY21 has been disappointing as it is a lost opportunity to revive growth. While we were positive when the corporate tax rate was cut, we now believe that it was a costly mistake and that similar reduction in personal income tax would have gone a long way in demand revival in the economy,” Prabhudas Lilladher said in a report.
"FM had all the leeway to go for higher fiscal deficit and create space for more capex and major push for reforms and consumption demand, but the intent seems to be missing," it said.
The Nifty50 breached its 200-DMA and bounced back, but given the fact that market expectations were high from Budget, some volatility or consolidation cannot be ruled out in the near term.
The market is fairly valued and as the Budget print becomes clear, investor focus will again shift back towards earnings and valuations. Any dip towards 11000 will be a good buying opportunity as the 1-year target for Nifty50 is placed above 13000, say experts.
“The 200 DMA acts like a ‘Lakshman Rekha’ most of the times and if markets have strength then they pull back from that level. During events like Budget, it is difficult to take a call whether 200 DMA holds. Market expectations from the budget were high on some kind of sector-specific stimulus (housing, infrastructure) and capital market reforms (abolishment of LTCG on equities) which have not materialised and to that extent, there could be near term disappointment,” Rusmik Oza, head of fundamental research at Kotak Securities Ltd told Moneycontrol.
“This time we also need to keep in mind that any further escalation of the Coronavirus epidemic can be negative for Indian equities. After a few days, the focus will go back to earnings and valuations. As of now the Nifty-50 is trading at 18x Fw PE which is fairly valued but leaves less room for any major re-rating,” he said.
Oza further added that the risk-reward ratio turns very favourable closer to 11,000 levels of Nifty-50 as our one year Nifty-50 target works to 13,400 levels. In that case, Investors can look to accumulate stocks in declines and turn aggressive buyers.
We have collated a list of stocks for the long term from various experts which are their top picks post Budget 2020:
Expert: Gaurav Garg, Head of Research at CapitalVia Global Research Limite Investment Advisor
Apollo Hospital: This Budget provides for increased healthcare and social security hence this stock will turn out to be a dark horse.
Sterlite Technologies: Budget 2020 aims to provide digital connectivity to 1000 villages thus this manufacturer of optical fiber would be a good pick to buy on.
Ajanta Pharmaceuticals: This Budget provides for increased healthcare and social security hence this stock will turn out to be a dark horse.
Relaxo Footwear: Increase in the custom duty will boost the profitability of this segment and thus it is a good buy in the near and long term.
IRCTC: Railways have got a favorable budget including PPP provisions for development and thus IRCTC will be able to achieve a beneficial top line.
Bata India: Increase in the customs duty to give a boost to the domestic sector and will boost the profitability of this segment and thus it is a good buy in the near and long term. Being a sector leader, this scrip is expected to outperform its peers.
Expert: Dinesh Thakkar – CMD, Tradebulls Securities
HUL, Nestle India, Britannia Industries:
IT, MNC & Non-Banking PSU Stocks could do well especially the ones which also have the impetus of high dividend yield as Dividend Distribution Tax has been abolished from companies side.
Many high dividend-paying companies were shying paying high dividends due to DDT but now with DDT gone, demand for high paying dividend companies will go up thus increasing their stock price.
Stocks like HUL, Nestle, Britannia Industries could do well as personal income tax rate has been reduced so extra savings will get converted into increase consumption thus benefiting FMCGs. TCS, Coal India, and ONGC could also do well from hereon.
Expert: Paras Bothra, President of Equity Research, Ashika Stock Broking
BFL is the largest consumer electronics, digital products & furniture lender in India, focused on affluent consumers. The Consumer finance business is the largest segment and contributes 39 percent of the total AUM (consolidated) of Rs 1,45,092 crore as of Dec 31st, 2019 followed by Mortgages, SME, Commercial and Rural at 30%, 13%, 9%, 9% respectively.
Consumer finance loans are high-churn, short-tenor and high-IRR products (24%-25%) which compensates for higher acquisition costs.
BFL is a leader in this segment driven by a mix of Consumer durable finance, Digital product finance, Lifestyle product finance apart from 2W & 3W loans (the majority of which is sourced from Bajaj Auto).
Expert: Kuldeep Tomar, Director, Advisorymandi.com
With the vision of expanding the fishing production, the finance minister has announced for raising fish production to 200 lakh tonnes in FY20-21. Inorder to increase the required feed of the fishes for their sustainability, the Avanti Feeds is going to be major beneficiary for this year.
The company is the leading manufacturer of Fish feeds prawns and shrimp processor and has marked its presence in aquaculture by delivering quality products.
An effective surge in the import duty of printed circuit boards of mobile phones is going to restrict the imports of the same globally.
Dixon Technologies bears a charter of major printed circuit board (PCB) manufacturer in India and increment in the import duty at their critical product is going to deliver high revenues in the books of the company.
Tata Consultancy Services:
India’ largest company as per free-float market capitalization is going to be the flavor of the town this year as the removal of Dividend Distribution Tax is going to bring a lot of investors who believes in having a bird in their hand rather than bush.
The company is known for distributing hefty dividends to their investors and removal of the related tax will push it to distribute more dividends.
The conversion of conventional electric metres to prepaid smart ones with in a time period of three years is going to be a turnaround story for the company. Market penetration of the product is very low in current scenario and government is looking to cover the whole economy. So, the stock deserves exceptional returns this year.
The upcoming release of National Logistics Policy which will bifurcate the roles of State Government and Central Government and the associated regulators is going to simplify the nomenclature of logistics sector.
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