With 18+ years of diverse experience in the BFSI sector specialized in Equities, Mr. Jyoti Roy is currently working as a DVP- Equity Strategist at Angel One. Jyoti Roy comes with in-depth knowledge of equity products including Direct Equities, Equity MF and Equity F&O and portfolio management. Presently, his key responsibility is to look at the overall portfolio allocation strategy across sectors and market capitalization with expertise in sectors such as Automobile, Banking, IT, Oil& Gas, Consumer discretionary & staples, Capital goods & engineering.
Finance Minister Nirmala Sitharaman has laid out the budget for India’s next financial year, starting from 1st April 2022. The budget holds immense importance because of the economic conditions post-second COVID-19 wave, which crippled the small businesses. There were high expectations that the budget would address the concerns related to high unemployment. To recover post-pandemic, Budget 2022 focuses on increased spending on infrastructure and the rural economy. To support growth plans, the finance minister has proposed to increase the size of the economy’s annual spending to 39.5 trillion rupees ($529 billion). The increased focus on capital spending will benefit infrastructure and allied sectors.
Let’s take a close look at the sectors benefitting from budget announcements:
Automobile:
The continued focus on higher infrastructure and road construction allocation will positively impact the commercial vehicle sector. Companies like Ashok Leyland is among the key beneficiaries. Similarly, formulating a battery swapping policy with inter-operability standards to improve the EV ecosystem will further the EV adoption levels. It is suitable for Tata
Motors and auto ancillary players catering to EV OEMs.
Bank:
The allocation of ₹48,000 crores under PM Awas Yojana, wherein 8mn houses will be completed for eligible beneficiaries (both urban and rural) will favour the affordable housing finance companies (HFCs). Furthermore, there is an extension of the ECLGS scheme up to Mar’23, with guarantee cover expanded by ₹50,000 crore to ₹5 lakh Cr. The additional amount of ₹50,000 crores has been earmarked exclusively for hospitality and related enterprises. There is also revamping of the CGTMSE scheme for facilitating additional credit of ₹2 lakh Cr. for MSEs. There is no impact expected on the stock price from both schemes.
Capital Goods:
The increased allocation by 17% to ₹1,37,100 crores to the Ministry of Railways and increased capital outlay in defence by 9.7% over FY22 revised estimates to ₹1,52,370cr will be positive for companies like L&T as far as the overall scheme of things is concerned. The 68% capital procurement budget earmarked for the domestic industry will also add to the growth. Defence spending, as well as the increase in indigenization, will benefit companies like BEL, Bharat Forge, Data Patterns, MTAR, etc.
Chemicals:
The reduced customs duty reduced on acetic acid from 10% to 5% will be positive for chemical manufacturing companies like Jubilant Ingrevia.
Diamonds, gems & jewellery:
Indian Gem and Jewellery companies can leverage the reduced customs duty on cut and polished diamonds and gemstones from 7.5% to 5%.
FMCG:
No increase in the tax rate on cigarettes has surprised the market positively. It is good for cigarette manufacturers like ITC, Godfrey Phillips etc.
Infra/Cement:
The government’s decision to increase Overall Capital Expenditure by 24.5% YoY on FY22 revised estimates to ₹7,50,246 crores for FY23 will benefit the infrastructure industry. The
revised estimates have been increased from ₹5,54,236 crores to ₹6,02,711 crores. Addition in
infrastructure projects will lead to an increase in the order book for the companies and the cement sector would be a key beneficiary.
Road infrastructure development companies such as KNR Constructions, PNC Infratech, Ashoka Buildcon will get an advantage as the capital outlay for MoRTH has been increased by 54.8% vs. FY22 revised estimates and 73.5% vs. budgeted estimates to ₹1,87,744 crores.
Logistics:
100 PM Gati Shakti Terminal to be set up in the next three years will be a booster for the logistic sector in India. Additionally proving railway connectivity will give a big boost to new warehousing and logistics facilities across the country. It is positive for the Container Corporation of India. Four multimodal logistics parks will be awarded through
the PPP (Public-private partnership) model in FY2022-23, which will help in ramping up transportation infrastructure in India and facilitate a swifter moment of goods. VRL logistics will get the benefit from this measure as the company is the leading player in road logistics.
Real Estate:
PM Awas Yojana has received an allocation of ₹48,000 crores, wherein 80 lakhs new dwelling in rural, urban areas to be completed under PM Awas Yojana in FY2022-23. Real Estate developers will launch more projects in the near future under Affordable Housing. It is favourable for
companies such as Brigade Enterprises and Sobha Ltd.
A closer look at all the different sectors indicates that the Budget is likely to be beneficial for all the sectors. Some of the stocks from these sectors that people can buy are Ashok Leyland, Kalpataru Power, JK Lakshmi Cem., Sobha and Oberoi Realty.