These 10 sectors are likely to benefit the most from Atmanirbhar 3.0 stimulus package

On November 11, the Union Cabinet had approved the Production-Linked Incentive (PLI) scheme for 10 sectors. These are pharmaceuticals, automobiles and auto components, telecom and networking products etc. among others.

With restricted fiscal space, Atmanirbhar 3.0 continued to echo on Government’s resistance to allocate fresh expenditure out of the kitty, but aims to support the rural economy, consumption, create jobs, as well as capital expenditure which would in turn help in reviving growth.

“Given the weak economic environment for FY21 and the restrained fiscal condition, we believe the Government is doing its best to drive growth in a sustainable manner. Hence the focus has been on capital creation and employment generation; which will in turn increase income levels and drive private expenditure,” Vinay Paharia, Chief Investment Officer, Union AMC Pvt Ltd told Moneycontrol.

“We consider these measures as important catalysts for driving the economic growth for years to come. While they may not provide benefits in the near term, they will likely have a lasting positive effect on the economy,” he said.

For the September quarter -- GDP estimates have been revised upwards at -8.6% from -10% by RBI and revisions of similar magnitudes have followed from various private agencies.

Growth bottomed out in June quarter and experts feel that it will surprise only on the upside as most industries or companies are back to pre-COVID levels based on the management commentary.

“COVID-19 infections appear to have peaked, high-frequency growth indicators are coming in strong, government policy action is beating expectations, and Indian companies are picking up activity through the pandemic,” Morgan Stanley said in a note.

“Thus, we expect growth to surprise on the upside, rates trough to be behind, and real rates to remain in negative territory for several months. We lift our F2021, F2022, and F2023 EPS estimates for the BSE Sensex 15%, 10%, and 9%, respectively – we are now between 6% and 7% above consensus estimates,” it said.

We have collated a list of sectors as suggested by various experts which could benefit from the stimulus package unveiled by the government:

Expert: R Venkataraman, MD, IIFL Securities Ltd.

Banks, Cement, Construction, Consumer Electricals and metals:

The government has kept the room open for more announcements to support growth. The guaranteed credit to support stressed sectors should help avoid restructuring and help banks/NBFCs to report lower slippages.

Cumulatively since April 2020, the central government has announced stimulus spending of ~2.1% of GDP and guarantees of ~1.8% of GDP. The guarantees have shielded the banks from sharp spike in NPAs while some of the spending measures like PM Aawas Yojana (Rs.180bn allocation) and additional allocation of Rs.400bn to MNREGA should help protect demand.

While the allocation of Rs.180bn to PM Aawas Yojana may seem small, it will have a multiplier effect and support demand for several sectors. The higher allocation should support demand in sectors like Cement (demand could increase by 3-4% of overall
volumes), Construction, Consumer Electricals and metals.

Expert: Sachin Shah, Fund Manager, Emkay Investment Managers Ltd.

Auto, Textiles, Solar, Pharma:

The government has in total approved PLI scheme for 13 sectors, each of these sectors has a huge potential to either scale-up exports or replace imports with domestic manufacturing for internal consumption (Atmanirbhar).

The sectors that are eligible for PLI scheme are Automobiles & Auto Components, Telecom & Networking Products, Advance Cell Chemistry Battery, Pharmaceutical Drugs, Food Products, Textile Products, Specialty Steel, White Goods, High-Efficiency Solar PV Modules and Electronic/Technology Products.

Clearly, all these sectors are now primed for explosive growth in the years ahead

Expert: Vinay Paharia, Chief Investment Officer, Union AMC Pvt Ltd

Real Estate, agriculture and infrastructure development:

In line with the AtmaNirbhar mission, the domestic manufacturing industry has been the main focus of these measures; being implemented through the production linked incentive (PLI) schemes.

And within manufacturing, mobiles, automobiles and automobile components have received higher incentives. Other benefiting sectors are pharmaceutical drugs, telecom & networking products, electronic goods/technology, food processing, textiles, etc.

Apart from the PLI schemes, the government has also announced measures to support real estate, agriculture and infrastructure development.

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