A Budget For All: JPMorgan's Expectations From Budget 2024
JPMorgan is overweight on industrials, financials, healthcare, autos and real estate and underweight on information technology and materials.
All eyes are on Union Budget 2024, which Finance Minister Nirmala Sitharaman will present on July 23. Although this will be the first time the Narendra Modi-led government presents a budget as a coalition government, JPMorgan thinks this could be a stepping stone for 'Viksit Bharat' by 2047, as the budget will likely focus on infrastructure and public investment. The brokerage house has come out with a set of expectations across sectors but their allocations align with domestic cyclical plays owing to positive earnings momentum, superior economic growth and policy continuity.
JPMorgan remains overweight on industrials, financials, healthcare, autos and real estate and underweight on information technology and materials.
Consolidation Without Compression
The record RBI dividend and increased tax collections allow for an increase in targeted welfare spending and still stick to the fiscal consolidation path. The effects of consolidation could be lower borrowing and yields and hence easier monetary conditions. Medium-term benefits could arise from improvements in the quality of capital expenditures. "A lower than planned central deficit last year meant authorities did not spend money it had borrowed. So this year's cash balance with the government was higher and could be used to cut this year's borrowing," stated the brokerage house in its note. This savings could be used for welfare expenditures, capital expenditures or tax cuts. The government has room for doing all the three is what JPMorgan believes.
Expected Market Direction
Over the next couple of months, the NSE Nifty 50 will likely reach 25,000 levels, according to the brokerage. However, changes in spending patterns around September, the upcoming state assembly elections for Maharashtra, Haryana and Jharkhand, and the U.S. elections may lead to consolidation around the second half of the ongoing financial year. Looking at history, Asian markets have largely struggled after the U.S. elections.
Key announcements by NDA 3.0 post elections
The Union Cabinet approved the development of an all-weather major port at Vadhavan in Maharashtra.
It increased the minimum support price for kharif crops for 2024–25.
It approved visibility gap funding for the installation and commissioning of 1 GW of India's first offshore wind energy project.
The Airports Authority of India's proposal to expand the Varanasi airport and make it a green airport has been approved at an estimated cost of Rs 28,700 crore.
The National Forensic Infrastructure Enhancement Scheme was sanctioned by the Union Cabinet with an allocation of Rs 2,250 crore till 2028–29.
The government announced assistance for an additional 30 million houses under the Pradhan Mantri Awas Yojana.
The government released the 17th installment of the Pradhan Mantri Samman Nidhi scheme, amounting to over Rs 20,000 crore for over 9.2 crore farmers.
JPMorgan's Preferred Picks
In the financial sector, the brokerage prefers ICICI Bank Ltd., Kotak Mahindra Bank Ltd., State Bank of India, Bank of Baroda, LIC Housing Finance Ltd., Shriram Finance Ltd., HDFC Asset Management Co., ICICI Prudential Life Insurance Co. and ICICI Lombard General Insurance Co.
Among automakers, its picks are Bajaj Auto Ltd., Mahindra & Mahindra Ltd., Ashok Leyland Ltd., Exide Industries Ltd. and Samvardhana Motherson International Ltd.
In real estate, JP Morgan's picks are Godrej Properties Ltd. and Prestige Estates Projects Ltd., while in the healthcare space, it prefers Mankind Pharma Ltd., Abbott India Ltd., Sun Pharmaceutical Industries Ltd., Max Healthcare Ltd. and Rainbow Hospitals Ltd.
Its select consumer names include Hindustan Unilever Ltd., Colgate-Palmolive (India) Ltd. and Nestle India Ltd.
