Govt's reforms on coal, mining, defence, aviation long-term positive; 15 stocks in focus

Finance Minister Nirmala Sitharaman (File image: Reuters)

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Finance Minister Nirmala Sitharaman's fourth tranche of stimulus emphasised on wide-ranging structural reforms across eight sectors — coal, minerals, defence production, power distribution companies, airspace

management, space, social infrastructure projects and atomic energy.

After announcing measures aimed at resurrecting MSMEs, rural economy and agriculture sector battered by the COVID-19 outbreak, FM Nirmala Sitharaman on May 16 unveiled the fourth tranche of the stimulus package

designed to help achieve the goal of Atmanirbhar Bharat.

The structural reforms announced by the FM were hailed by experts and they said that the reforms are the long-term positives.

"FM's structural reforms take the policy of going 'vocal about local' forward. Indigenisation of imported spares, corporatisation of Ordnance Factory Board and listing in the stock exchange are indeed bold

structural reform measures" said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

"Raising the FDI limit in defence manufacturing will help in technology transfer and will be a major boost for domestic manufacturing. Auctioning of six more airports and privatisation of Discoms in UTs are welcome. In brief, liberalisation in fast forward mode."

Dhiraj Relli, MD & CEO, HDFC Securities also believes the fourth part of the stimulus announcement highlighted new horizons of growth.

"The announcement covered a wide spectrum of areas. These are spread over multiple years and hence their immediate impact may be limited. Fiscal impact also seems very small for the current fiscal. A lot of these measures need not have waited for COVID-19," Relli said.

"Measures related to power generation and distribution and mining are welcome as they can make an impact fast if states get on board soon leaving aside their political compulsions. Measures on defence and space will lead to an uptick in stock prices of some companies for a few days but here again, one will have to watch as to how fast intent is converted into execution," said Relli.

Rajee R, Senior Director, Brickwork Ratings said the mega structural reforms in the coal, mining, defence production and space sectors among others are welcome and bold and will go a long way in creating Atma Nirbhar Bharat by increasing operational and technological efficiencies in the sectors with an emphasis on autonomy, professional management, transparency and accountability and Make in India.

While the structural reforms are a welcome move, there is no immediate trigger for the market. Also, the government needs to bring reforms in land, labour and tax laws to make India's economy self-reliant.

"These are good measures, but the market is awaiting bold reforms in the areas of production, land and labour. The need of the hour is to take these bold decisions and capitalise on the opportunity of garnering a good share of shift in manufacturing base from China. Radical reforms in land, labour and tax laws will be a key contributor to the success of 'Make in India' policy," said Aishvarya Dadheech, Fund Manager, Ambit Asset Management.

The fourth tranche of the financial package is expected to be beneficial for coal, aluminium, defence and aviation stocks and they may see traction in the coming sessions.

As per Prashanth Tapse, AVP Research at Mehta Equities, measures related to coal and bauxite will be good for stocks such as Coal India, NMDC and GMDC.

Tapse said MSTC will be in action on E-auction of coal mines.

Measures related to the domestic defence purchase instead of import from other nations and raising of FDI limits from 49 percent to 74 percent will benefit stocks such as HAL, BEL, Apollo Micro, Larsen & Toubro, BEML and Midhani, Tapse said.

From the civil aviation sector, GMR Infra, IndiGo and SpiceJet will be benefitted by the government's announcements, Tapse said.

Kedar Shahoo Kadam, DGM & Head Research at Cholamandalam Investment said the government's reform announced on the coal and mining sector will benefit stocks such as JSW Steel, JSPL and Hindalco.

On the other hand, reforms in defence sector will benefit Bharat Forge, Bharat Dynamics, BEL, BEML and Larsen & Toubro.

In the aviation sector, SpiceJet, InterGlobe Aviation, GMR Infrastructure and Hindustan Aeronautics will be in focus, Kadam said.

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.