Budget 2021: GDP decline already factored in by markets, says Sharekhan; lists top pre-budget picks

Updated : January 20, 2021 01:02 PM IST

Sharekhan pointed out that this is the first instance where India has seen an economic contraction in the last many decades

The scenario (GDP decline) is mirrored across the world it has been already factored in by the markets, the brokerage observed.

The government may maintain its focus on the development of infrastructure (roads, water and affordable housing)

Brokerage Sharekhan believes that the decline in the gross domestic product (GDP) has already been factored in by markets. The GDP decline scenario is mirrored across the world and therefore, the revised deficit figures for FY20-21 won't be a major surprise, the brokerage said in a pre-budget report.

Pointing at the impact of the unprecedented coronavirus pandemic and its impact on the economy, Sharekhand said that it is the first instance where India has seen an economic contraction in the last many decades. It is also the first GDP decline since the country began publishing quarterly numbers in 1996. The budgeted estimates for FY2021 alter dramatically, therefore, and the revised deficit figures for FY2021 are unlikely to be a major surprise.

The government is expected to limit the fiscal deficit to 7 percent of GDP, despite higher expenditure and lower revenues for this fiscal. Yet, the economic recovery has surprised pleasantly and is likely to turn positive in Q3 FY21 itself after the massive decline of 23.8 percent in Q1 FY21, the brokerage noted.

Sharekhan believes that it is imperative for the Centre and states to continue with counter-cyclical fiscal measures to sustain the momentum of the recovery. Hence, the government may maintain its focus on the development of infrastructure (roads, water and affordable housing) that would give the economy a much-needed earnings stimulus, it added.

Further, the extension of PLI schemes might also be announced in the Budget. Infrastructure, Real Estate, Construction, and Railways are some sectors, which may be in focus in the upcoming Budget 2021, Sharekhan stated.

It also believes that measures to help iron out bottlenecks

and boost industry and employment will be positive for the capital markets. However, expectations are running high, which is never good news before any event, it added.

Among individual stocks, L&T, Hero MotoCorp, UltraTech Cement, Ashok Leyland, M&M, HPCL, IGL, and SBI are its top picks in the large-cap space.

Meanwhile, top midcap picks include BEL, Coromandel International, KEC International, KNR Constructions, Century Plyboards, and Carborundum Universal.

Budget 2021: GDP decline already factored in by markets, says Sharekhan; lists top pre-budget picks

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