Union Budget 2021 | Market looks pleased, how to position your investments now?

The Union Budget 2021 cheered Dalal Street as the equity barometer Sensex jumped over 2,300 points while the Nifty reclaimed 14,250 on February 1.

Experts and analysts hailed the Budget as growth-oriented and a pragmatic one as the government raised CAPEX target without increasing tax rates.

"A pragmatic Budget which delivered on many parameters without resorting to higher taxes. The Budget seeks to kickstart growth through higher spending on infrastructure, healthcare and rural India with special focus on MSME and startups as India’s demographic profile is now making Tier-2 & Tier-3 cities the new engine of growth," said S Ranganathan, Head of Research at LKP Securities.

B Gopkumar, MD & CEO, Axis Securities pointed out that the focus of the government is on spending to revive the economy without major changes in the taxation structure.

"The fiscal deficit pegged at 6.8 percent is clearly expansionary which will aid the economy significantly. The government’s borrowing also seems quite reasonable which indicates the Budget is quite well-balanced. The proposals for the financial sector which include privatization of public banks and asset reconstruction company are also significant positives for the financial sector," he said.

Key takeaways for investors

Analysts pointed out that the Budget has avoided significant negatives for the market and there are many positive takeaways.

Though the government introduced agri infrastructure cess, there was no COVID tax which was widely feared. Besides, the government stayed away from making any change in personal and corporate tax, there was no levy of wealth tax, super-rich tax, STT and LTCG.

Ranganathan of LKP Securities said as the Budget is growth-focussed, several sectors of the economy will benefit and investors should focus on companies that are growing.

Market experts are of the view that healthcare, technology and infrastructure-related stocks should do well in days to come owing to the government's focus on these sectors.

In the automobile sector, the government announced a voluntary vehicle scrapping policy which is positive for OEMs as it will push the demand for cleaner cars. Stocks like Maruti, Tata Motors, Mahindra & Mahindra may benefit in the long-run.

The FM announced bad banks to address the problem of stressed assets of the banks. This will be set up through an asset reconstruction model. This is seen as a big boost for the banking sector as it will enable them to focus on new businesses and help in resolving bad loan issues.

Giving a big boost to infrastructure projects, Finance Minister Nirmala Sitharaman in her Union Budget 2021 speech announced a National Bank for Financing Development (NaBFID) to help in the process of infrastructure financing in the country.

Realty, cement, housing finance companies and paint sectors may also gain as the announcements made on the front of affordable housing may boost the demand for affordable housing.

"While the extension of the deduction on payment of interest on purchase for affordable housing by another year will encourage home buyers to invest in their own properties, an extension of the tax holiday on affordable housing projects will encourage more launches in this category," said Ravindra Sudhalkar, CEO, Reliance Home Finance.

The Union Budget 2021 has lined up Rs 3.05 lakh crore package to revive power distribution companies (discoms) through a revamped reform scheme.

This will end monopoly in the sector by giving option to consumers to choose from more than one discoms. Adani Transmission, Siemens, Adani Green Energy and BHEL​ are among the stocks that can benefit from that.

Ajit Mishra, VP Research, Religare Broking advises investing in agriculture & allied sectors, autos, banks, FMCG and healthcare in a staggered manner.

"The Budget has been positive for the markets which led to the rally. At this point when the markets are hovering at the peak, we would advise investors to stick to large and mid-cap companies within sectors such as agriculture & allied sectors, autos, banks, FMCG, healthcare which are likely to benefit over the long term. We would advise investing in a staggered manner," said Mishra.

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