Budget 2024: Infrastructure To Rural — Stocks On Traders' Radar From Key Sectors

As India’s Finance Minister unveils the Union Budget, all eyes will be on key sectors and themes like infrastructure, consumption and public sector companies. Additionally, market watchers expect that this might propel the equity benchmarks to surpass its landmark levels. 

Investors have already begun adjusting their positions in the equity market, as the 10-day volatility of key indices is seeing mild upticks going into the budget announcement. Market swings are expected to rise amid these circumstances, especially with the quarterly earnings that recently began with the information technology majors.

This comes while India’s equity gauge — NSE Nifty 50 — is looking to surpass the key psychological barrier of 25,000, having hit fresh life highs over 40 times so far this year. The 30-stock S&P BSE Sensex has surged about 12% this year, making it the sixth-best index among its Asian peers. 

Overseas investors, ahead of the budget announcement, alone have pumped Rs 30,772 crore this month into Asia's third-largest stock market.

Capital goods, automobiles and auto components, and information technology have been sectors that global funds have been buying in July's first half, according to NSDL data.

There are high expectations around the budget, the earnings season and the policies of the Union government, Kranthi Bathini, director of equity strategy at WealthMills Securities Pvt. told NDTV Profit earlier. "All these high expectations are definitely going to create some volatility going ahead." 

Finance Minister Nirmala Sitharaman will announce the much-awaited measures on Tuesday, the first time since BJP-led NDA formed government at the centre for the third consecutive term. 

According to a Jefferies report, the upcoming budget could benefit several domestic sectors, including affordable housing, capital expenditures, consumer goods, and rate-sensitive sectors.

There is an expectation that Budget 2024 will ensure policy continuity, according to Dikshit Mittal, fund manager and senior equity research analyst at LIC Mutual Fund Asset Management Ltd.

“The budget may focus on infrastructure spending, job creation, sustaining capital expenditure momentum, and pushing for revenue growth.” Meanwhile, the budget is expected to continue with the process of fiscal consolidation, he said.

JPMorgan expects this could be a stepping stone for 'Viksit Bharat' by 2047, as the budget will likely focus on infrastructure and public investment. 

With increased capital expenditure, the government is expected to continue its focus on building infrastructure. Big names in the construction infrastructure space have been bagging consistent order wins from the government, thereby building their order pipeline. 

The capital expenditure budget could increase by around Rs 30,000 crore, representing 20% year-on-year growth, which would benefit contractors and capital goods companies, with Jefferies expressing a positive outlook on Larsen & Toubro.

Stocks in focus: Larsen & Toubro Ltd., Rail Vikas Nigam Ltd., IRB Infrastructure Developers Ltd., NBCC India Ltd., IRCON International Ltd., G R Infraprojects Ltd., H.G. Infra Engineering Ltd., etc.

The recovery in rural spending will be a key priority for the government, given the recent demand scenario. Sectors like fast-moving consumer goods, auto and auto ancillaries could be key beneficiaries of the potential consumption boost.

The government is considering consumption-boosting measures worth more than Rs 50,000 crore in the upcoming budget. For the first time in seven years, tax cuts for lower-income individuals are part of the Modi government's first budget in their third term. 

Jefferies explained that the tax cut could be directed at the middle class with an income of Rs 10–15 lakh, which would positively impact consumer discretionary demand.

A lot of incentives have been provided to boost the supply side, and what remains to be seen is that demand-side push, Mrinal Singh, head of alternates (listed equities) at Bandhan AMC Ltd., told NDTV Profit in an interview. The upcoming budget could be something to watch for, Shah said.

Stocks in focus: Hindustan Unilever Ltd., Nestle India Ltd., Jubilant FoodWorks Ltd., Devyani International Ltd., Zomato Ltd., Nykaa Ltd., Honasa Consumer Ltd., Bharti Airtel Ltd., V-Guard Ltd., Crompton Ltd., Havells Ltd. and Maruti Suzuki India Ltd., TVS Motor Co., Hero MotoCorp., Mahindra & Mahindra, etc.,

A better domestic manufacturing ecosystem for renewable energy across areas like green hydrogen could be on the cards in the upcoming budget. This could be done through a mix of grants, tax breaks, and product-linked incentive schemes, according to CareEdge Ratings.

CareEdge also expects continued momentum in tendering activity by government agencies for renewable energy projects that combine battery storage or pumped storage to improve grid stability.

Stocks in focus: NTPC Ltd., Godawari Power & Ispat Ltd., SJVN, NHPC Ltd., JSW Energy, Inox Wind Energy Ltd., and Suzlon Energy Ltd., etc.

To achieve its goal of Aatmanirbhar Bharat, or self-reliant India, and to help sustain the 'China plus one' momentum, the budget will likely focus on improving the dynamics of local manufacturing via additional or extending current schemes and tax benefits.

The government is expected to maintain its pro-industrial policy to encourage private investments, according to Vinod Nair, Head of Research, Geojit Financial Services.

Labour-intensive sectors such as agriculture, cattle, textiles, leather, marine products, and construction can anticipate supportive schemes, he said. "Policy continuity is expected in the manufacturing, capital goods, and renewable energy sectors."

Further, it is expected that PLI schemes will be expanded and include additional sectors, particularly those that are labour-intensive, he said.

Stocks in focus: companies like Sona BLW Precision Forgings Ltd., Amara Raja Energy & Mobility Ltd., Dixon Technologies Ltd., Amber Enterprises Ltd. and other MSMEs will benefit.

Traders will keep an eye on rate-sensitive stocks like ITC Ltd. and other petrochemicals, along with upstream and downstream petroleum companies, as the announcement will likely have some tweaks on this front.

Jefferies expects a reduction in the borrowing target as well, which should be positive for rate-sensitive sectors such as property developers and non-banking financial companies (NBFCs). "Tobacco taxation changes of more than 5-7% could be seen as positive for ITC."

Stocks in focus: ITC Ltd., Aavas Financiers Ltd., Home First Finance Ltd., Godrej Properties Ltd. and Prestige Estates Projects Ltd., Supreme Petrochem Ltd., Bharat Petroleum Corp., Indian Oil Corp., etc.

With data inputs from Agnidev Bhattacharya.