Highlights
- Bank profitability to get support
- Focus on green energy & electronics
- Travel & luggage companies to benefit
- Measures augur well for capex-linked and R&D firms
- China-plus-one firms are not amused
The interim budget for 2024, while devoid of major tax changes, did throw up its set of winners and losers although the winners far outnumber the losers.
Fiscal discipline and lower government borrowing to support profitability of banks.
Adhering to the target of attaining a fiscal deficit of 4.5 percent by FY26, the Union budget has targeted a reduction in the Central Government’s fiscal deficit to 5.1 percent of GDP for FY25 from 5.8 percent of the GDP (revised estimates) in FY24. The gross and net borrowings are pegged at Rs 14.13 lakh crore and 11.75 lakh crore in FY25, lower compared to FY24.
As the supply of bonds will be lower, bonds have rallied. The rally in gilts should support non- interest incomes of banks. The mark-to-market gain from an investment portfolio will be positive at a time when interest margins are under pressure.
Kotak Mahindra Bank had the highest “Available for Sale” and “held for trading” books among banks. Hence, the bond rally is a big positive for it. Other beneficiaries to watch are SBI and ICICI Bank.
Green energy remains a key focus area
Prime Minister Narendra Modi recently announced the Pradhan Mantri Suryoday Yojana, under which rooftop solar panels will be installed at one crore households. This augurs well for Visaka Industries (integrated solar rooftop solutions provider) and Borosil Renewables (manufacturer of solar glasses).
Moreover, the focus on EV charging, renewables, and huge targets for solar installations are positive for Tata Power.
Electronics infra push through semiconductors
The allocations for Semiconductors, Display manufacturing, PLI (MEITY) - ESDM, IT HARD PLI have been raised. The key beneficiaries in India's electronics manufacturing push and higher budgetary outlay include Dixon Technologies, Kaynes Technology, Syrma SGS, and Optiemus Infracom.
Travel and tourism beneficiaries
The government’s focus to develop tourism spots, including islands and spiritual centres, is positive for hotel companies such as Indian Hotels, SAMHI Hotels, Lemon Tree Hotels, and Kamat Hotels and luggage companies like Safari Industries.
Beneficiaries of capex push
The overnment has increased capital expenditure allocation by 11.1 percent YoY to Rs 11.11 lakh crore. The increased allocation would sustain the growth momentum for infrastructure stocks such as L&T, HG Infra Engineering, and GR Infra Projects. The fiscal discipline and lower market borrowing should help in “crowding in” of private players. The budget is directionally supportive for interest rate reduction, which should also support the capex cycle.
KEC International has a strong presence in railways and higher capex for the development of corridors should benefit it.
Infrastructure development through the ‘PM Gati shakti’ scheme will decongest the existing rail network and improve logistics efficiencies. Multimodal logistics players such as Concor and Transport Corporation of India stand to benefit.
Emphasis on sustainable agriculture
The focus on the use of Nano DAP and extending its application to all climate zones is a big positive. Nano fertilisers will improve crop yield with less fertiliser consumption, lighten the subsidy budget, and will cut down import requirements. Coromandel International and Paradeep Phosphates will be the big beneficiaries.
Moreover, the focus on bio-agri inputs should help Coromandel International, which is one of the largest organic fertiliser marketers in India.
Under the PM's Matsya Sampada Yojana, the government aims to double aquaculture exports and generate over 50 lakh employment opportunities. The effort to increase productivity and yield under this scheme should act as a tailwind for shrimp exporters such as Avanti Feeds and Apex Frozen Foods.
Dairy companies like Dodla Dairy and Heritage Foods are likely to benefit given the comprehensive focus on dairy development and the setting up of a dairy processing fund. Higher milk production and lower procurement prices can lead to higher margins.
The increase in MNEGRA allocation by 43 percent from the budgeted estimates of FY24 and higher spending in rural markets would generate higher income and indirectly boost consumption. Stocks to benefit are Dabur, Hindustan Unilever, and Cantabil Retail India
R&D push
Pharma, tech and defence companies should benefit from the Rs 1 lakh crore corpus to be set up for interest-free loanw to be provided for R&D in tech savvy sectors. The gainers include Syngene, Concord Biotech, Sun Pharma, Cipla, Cadila, Cipla, Neuland labs, MTAR, and Data Patterns.
Stock losers
No change in personal income tax and duty structure is not positive for overall consumption and the China-plus-one theme sectors and stocks.
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