Budget 2018: Market under pressure; key stocks to track across 5 sectors on B-Day

The benchmark indices came under under pressure on Wednesday ahead of the Budget 2018 due on Thursday. The Sensex slipped below 36,000, while the broader Nifty tested its key support of 11,000.

Expectations are abound the Finance Minister Arun jaitley will strike a balance between pro-business and a populist budget and will only marginally breach the budgeted fiscal deficit target of 3.2 per cent for FY18. 

Analysts at Axis Capital expects following sectors to be the beneficiaries in Budget 2018: (A) Rural focus: Cement, FMCG and infra; (B) Affordable housing push: Banks, Cement, Realty; (C) Corporate tax cut: FMCG, retail, while all insurance companies could be losers if corporate tax rationalisation leads to higher tax rate for insurance companies, which are currently paying 15%.

We have compiled a list of stocks across five sectors that will stay in focus on the B-Day: 

1) Auto sector

Multiple tax rates are applicable on PV segment. If the government makes a provision for two GST rates, it will be positive for Maruti Suzuki. 

Higher JNNURM orders for bus manufacturers and incentives for EVs will benefit Hero MotoCorp, Ashok Leyland, Eicher Motors and Tata Motors. 

If the government announces a tax friendly framework for electrification of India’s transport fleet, and offer incentives for charging infrastructure and import of EV components, it will be positive for Amara Raja, Exide Industries, and Motherson Sumi.

2) Banking sector

The government is expected to announce the details around capital infusion plan. Larger PSU banks such as SBI, PNB and BoB will be a better beneficiaries of the same. The government may also provide a roadmap on merger plan of weak PSU banks. The move will benefit the banks under Prompt Corrective Action (PCA) such as IDBI Bank, Bank of India, UCO Bank etc. 

The budget is expected to increase the fund limits on affordable housing or increase subsidy provided on interest rates for borrowers. Hence the credit offtake for affordable housing will pick up. The move will be beneficial for ICICI Bank, HDFC Bank, SBI, Indian Bank, DHFL, Karur Vysya Bank, GIC Housing Finance, HDFC, Ujjivan Financial Services. 

3) Capital goods and infrastructure 

Higher budgetary allocation towards roads, railways, metro, defense and urban infra (AMRUT) projects will be positive for L&T, Dilip Buildcon, Sadbhav, ABB, Siemens, VA Tech and EPC players.

4) FMCG and Retail

The government is expected to reduce the corporate tax rate from 30 per cent to 25 per cent. It will benefit full tax paying companies such as ITC, HUL, GSK Consumer, Nestle India and Colgate.

Increased stimulus for rural India in the form of higher allocation to MNREGA and other rural employment initiatives will be positive for Hindustan Unilever, Dabur, Emami, Colgate and JYL.

Some relief to the jewellery industry in terms of lower custom duty on gold import is also expected. custom duty was increased from 2% to 10% in 2012-13. 

5) Real Estate sector

The government may announce incentives such as increase in subsidy on interest rate for low-mid income housing loans, and increase in carpet area per unit to acquire affordable housing status. The deduction limit on housing interest and principal on housing loan may be increased. Holding period for long-term capital gains on REITs may be reduced. Stamp duty transfer of assets into REITs may get exempted. 

The move will be positive for Omaxe, Prestige Estates, Sobha, Purvankara, Oberoi, Indiabulls Real Estate, Godrej Estate, Godrej Properties, DLF, Brigade Enterprise. 

Disclaimer: Investment/trading ideas expressed here are for informational purposes. Readers are advised to check with certified experts before investing.