Here are top 10 themes that will dominate 2024 Interim Budget

The steady decline in corporate income tax as a share of GDP between 2008 and 2019 has also reversed, noted Anand.

Finance Minister Nirmala Sitharaman will present the upcoming pre-election Interim Budget on February 1, 2024, at a time when the overall economic landscape appears stable, backed by strong macroeconomic data. Given that 2024 is an election year, the Vote on Account or Interim Budget would merely be an interim approval to spend money, without any major tax or policy changes expected.

However, the significance of this budget should not be understated as it provides an opportunity for the government to underscore economic accomplishments in the lead-up to the 2024 general elections. Moreover, the fiscal math of the budget will provide an understanding of fiscal policy in the post-election period, assuming a policy continuity.

Here are the top 10 themes that the government is likely to emphasise in the 2024 Interim Budget:

#1 Rail theme to dominate Street; capex to get bolstered

The Ministry of Railways had received a nearly nine-fold increase in capex outlay in the Union Budget 2023-24 compared to the 2013 outlay. This momentum is predicted to stay on in 2024, said analysts, with expectations of increased allocation and continued investment in safety enhancements, asset replacement, and ambitious projects such as the bullet train.

As per rating agency CareEdge Ratings forecast, the Railways is likely to bag a budgetary allocation of around Rs 3 lakh crore in the Union Budget 2024-25, reflecting a 25 percent increase from the previous year.

Stocks to watch: Rail Vikas Nigam (RVNL), Indian Railway Finance Corporation (IRFC), Ircon International, NBCC (India), RailTel Corporation of India and Texmaco Rail & Engineering.

Budget 2024-25: Railway stocks on a bull ride as analysts predict higher allocation of capital

#2 Govt's infra thrust is expected to continue

Analysts expect the interim budget to prioritise rural and urban connectivity, railways, ports, aviation and highways for their significant impact on growth and employment. "With a potential increase in capital allocation, these sectors are anticipated to serve as India's growth engine in the upcoming years, enhancing the overall quality of life," said analysts at Tej Mandi.

In the Union Budget 2023-24, the finance minister allocated around Rs 10 lakh crore for infrastructure capital expenditure, a 33 percent increase from the previous year. For 2024-25 fiscal, the Ministry of Road Transport and Highways requested a budgetary allocation of Rs 3.25 lakh crore, marking a 25 percent YoY increase.

Stocks to watch: KNR Constructions, PNC Infratech, RITES, KEC International, and PSP Projects. In the cement sector, Ambuja Cement, Shree Cement, Dalmia Bharat Ltd, JK Cement, and JK Lakshmi are likely to be in focus.

Budget 2024: Anticipating growth in India's infrastructure landscape

#3 India's 'self-reliance' theme to gain focus; Defence to benefit

The government's focus on making India self-reliant and a global export hub in the long term will continue this Interim Budget. Analysts believe investments in the defence side will continue, with increases in capex spending to be seen more in FY25.

In the FY23-24 budget, the government allocated around 68 percent to the defence industry to promote self-reliance and reduce import dependency. Around 25 percent of the defence R&D budget was earmarked for private players and startups.

Stocks to watch: Hindustan Aeronautics, Data Patterns, Bharat Electronics, and Bharat Dynamics.

#4 Power focus - Renewable energy transition to play big

The power sector is likely to gain additional attention momentum in the Interim Budget as the government places expansion of renewable energy as the top priority. Analysts expect a higher capex outlay is likely to be announced for renewable energy, incentives for green initiatives, and production-linked incentives (PLIs) for solar module manufacturing.

In the FY24 budget, the power segment received a 58 percent increase in allocation to Rs 20,671 crore compared to the previous fiscal. Analysts at Jefferies in an earlier note believe that power capex should grow 9x at a CAGR of 20 percent during FY23-26, up from 2.2 percent during FY10-20.

Stocks to watch: NHPC, NTPC, SJVN, Power Grid, Tata Power, and Adani Power

#5 Budget before elections will aim to bolster income; consumption flavour to play out

As the Interim Budget is expected to be a populist one, the government will attempt to boost disposable income in the hands of citizens, which thereby will boost spending. One way of doing this would be by increasing farm income through a minimum support price (MSP) hike, said market experts.

Additionally, the likely focus on rural development and social schemes, farm credit, PM Awas Yojana (affordable housing), food security, and higher allocation to MGNREGA can also increase rural income.

Stocks to watch: HUL, ITC, Avenue Supermarts, Tata Consumer Products, Marico and Britannia, among others.

#6 Dinvestments to be tempered; capex programme to favour PSUs

The public sector unit (PSU) pack's future will be determined by the Interim Budget, given the government’s capex allocation for each pocket, said analysts. With divestment proceeds likely to be tempered this budget to avoid any disturbance to fiscal math, analysts believe PSUs will dominate the Street flavour as their efficiencies have improved.

According to analysts at rating agency ICRA, the government is likely to keep disinvestment proceeds below Rs 50,000 crore in this interim budget. In the current fiscal, the government mopped up around Rs 10,000 crore from PSU disinvestments, substantially below the targeted Rs 51,000 crore.

Stocks to watch: Concor, IDBI Bank, BPCL, and Shipping Corporation of India.

#7 Rural pitch to continue - focus on 'bottom of the pyramid' 

Analysts believe policies related to social safety, net to bottom of pyramid, including comprehensive insurance coverage and support for women will be laid out this interim budget.

"We expect policies oriented towards the upliftment of ‘bottom of the pyramid’, which are aimed at reducing out-of-pocket expenditure on necessities and emergencies," said analysts at Nirmal Bang.

The brokerage firm also expects measures towards women’s empowerment through employment generation schemes and economic safety nets.

Stocks to watch: Chambal Fertilisers and Chemicals, Coromandel International, GNCF, Escorts Kubota, Bayer CropScience, and UPL

#8 Big emphasis on manufacturing, green & clean technology

The budget could increase the domestic manufacturing base, which would involve tweaking existing production-linked incentive (PLI) schemes or bringing new sectors under its ambit.

"Clean and green technologies and the surrounding ecosystem are likely to remain in focus. Faster Adoption and Manufacturing of Electric Vehicle (FAME) subsidies are likely to continue with some rationalisation," said analysts at Nirmal Bang.

Stocks to watch: Exide Industries, Bajaj Auto, Fiem Industries, Tata Motors, and TVS Motor

#9 Support for SMEs and digital inclusivity roadmap for financial sector

Analysts expect the Interim Budget to support Small and Medium Enterprises (SMEs) and stay on a fiscal consolidation path. "We're expecting the budget to acknowledge and encourage fintech's role in helping small businesses with the goal to create a friendly environment for businesses in India's changing economy," said Rajesh Sharma, Managing Director at Capri Global Capital.

Apart from that they also expect a boost in digital inclusivity, with banks and NBFCs leading the charge in using technology for positive change.

"In our optimistic outlook, we believe that this budget not only foresees positive strides for the financial sector but also serves as a testament to the nation's readiness to embrace change as a catalyst for sustained economic growth," Sharma added.

Stocks to watch: Bajaj Finance, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Paytm, and PB Fintech

#10 Focus on real estate and housing

Analysts at Phillip Capital anticipate the government to announce SOPs for the middle class in this interim budget, be it the promotion of a new income tax regime or housing. In this case, real estate and housing will be direct beneficiaries.

The real estate upcycle can have a multiplier effect on the economy and the government's allocation of additional funds for affordable housing could bode the sector well.

"In the coming budget, the governing agencies should look into giving the real estate the industry status which is long due alongside mulling over single window clearance, tax breaks, and GST rationalisation. This would not just be beneficial for the realty industry but the positive impacts will cascade into other related industries," said LC Mittal, Director, Motia Group.

Stocks to watch: Godrej Properties, Oberoi Realty, DLF, DB Realty, and Brigade Enterprises

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