The interim Budget FY20 was carved to perfection to woo farmers, middle-income group, creating more jobs and providing some relief to the MSME sector. But, what about the investors?
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Although there was nothing special for the investor community at large but D-Street is taking comfort in the fact that the fiscal deficit number did not exceed much from the target and the measures announced in the Budget are likely to support earnings of companies in consumption, consumer discretionary, agri-related sectors and to some extent healthcare companies.
The fiscal math assessment is more relevant for FY19 as FY20 numbers will get substantially changed with the formation of the new government after the 2019 General Elections. Benchmark indices are likely to move sideways, so investors are better off placing bets on select sectors which are likely to get benefit from the Interim Budget, suggest experts.
“Budget is reflationary, with 13 percent spending growth on the back of 14 percent growth in FY19. The budget is clearly geared toward electoral expediency with a significant focus on uplifting the farm and housing sectors, job creation, and alleviating the distress in the MSME sector,” Emkay Global said in a report.
“The reflationary stance of the Budget could provide a boost to corporate earnings, especially in consumption, agri-rural sector, retail lending, and housing, there can be implications for inflation and interest rates as well,” it said.
Emkay Global has maintained its Nifty target range of 11,000-10,400 but continues to remain cautious on mid & smallcap stocks. It is 'overweight' on IT services, pharmaceuticals, BFSI (primarily private banks), and specialty chemicals; 'equalweight' on auto & auto ancillaries, consumers, oil & gas, metals & mining, and fertilizers & agro-chemicals; and 'underweight' on capital goods, construction & infra, cement and telecom.
The global investment bank, UBS maintained its Nifty base case of 10,000 for December 2019, and remained 'selectively overweight' on consumer discretionary and neutral on autos. It remains 'underweight' on industrials/infrastructure sectors.
For autos, the Budget will support entry-level 2-wheelers, especially in rural areas, but will unlikely benefit premium bikes, MCHV and tractors, it said.
Here is a list of 20 stocks that are likely to benefit the most from the announcements made in Interim Budget 2019:
Morgan Stanley on property sector: DLF, Oberoi Realty, Sobha and Prestige Estate
Interim Budget FY20 has some positives for both developers as well as homeowners. The Budget has given developers more leeway to monetise finished inventory and extends tax exemptions to promote affordable housing.
Home buyers/owners with more than one house are not disadvantaged. A committee of ministers has been appointed to examine GST for housing, which currently is high at an effective rate of 12 percent. Morgan Stanley remains constructive on the industry with a preference for mid-cap stocks such as Oberoi Realty, Sobha and Prestige with all three OW-rated.
The government has extended the exemption from tax levy on notional rent for unsold ready inventory by one yearn to two years (after the end of the year in which the project is completed).
Assuming a 1.5-2 percent rental yield, this can result in a 60-70bp (as a % of sale value) of tax savings. In terms of stocks, DLF and Oberoi have high complete/near complete inventory and could benefit the most.
Analyst: Mustafa Nadeem, CEO, Epic Research
Automobile: Hero Moto, Mahindra & Mahindra, Ashok Leyland
The change in the import duty for electric vehicles component is a big boost and positive step especially when we are looking to revolutionize the Auto industry by 2030.
This will certainly give some relief to electric vehicle (EV) players and especially well-established players like Hero MotoCorp and M&M in two-wheeler segment.
Construction: PNC Infra, L&T, KNR, Sadbhav, Ashoka Buildcon and Dilip Buildcon
For FY20, the total capital and development expenditure (including IEBR) of Railways has been pegged at Rs 1.6 trillion against Rs 1.4 trillion and increase of 14.3 percent on a YoY basis which should aid order pipelines for companies like PNC Infra and L&T.
Allocation to Pradhan Mantri Gram Sadak Yojana has been increased to Rs 19000 crore against Rs 15,500 crore on a YoY basis. The overall allocation to roads is Rs 1.7 trillion compared to Rs 1.5 trillion on a YoY basis which is an increase of 13.7 percent YoY which will give strong visibility to road sector ordering and be positive for companies like KNR Construction, Ashoka Buildcon, Sadbhav Engineering, PNC Infra, and Dilip Buildcon.
Consumer Durables: Jubilant FoodWorks, TTK Prestige, Hawkins Cooker, Havells India, Crompton Electric Consumer, V-Guard, Symphony
Tax reforms for middle-class taxpayers. Full rebate on taxable income up to Rs 5 lakh annually will benefit 40 percent of tax payer base (i.e.30 million taxpayers). The brokerage firm expects it to drive higher urban discretionary spend which should benefit companies like Havells India, Jubilant FoodWorks, Symphony, and TTK Prestige.
PM Ujjwala Yojana has been extended to 8 crore households compared to 5 crore households earlier. The govt has already provided new LPG connections to 5.9 crore households and aims at attaining the 8 crore household guidance in FY20. The move should support companies like TTK Prestige, Hawkins Cookers, and V-Guard.
Pradhan Mantri Awaas Yojana budget allocation is at Rs 16000 crore compared to Rs 18300 crore for FY19RE. States are running behind their target of constructing 1 crore households in rural areas by the end of FY19.
The brokerage firm expects an acceleration prior to the general elections which should support companies like Havells India, Crompton Consumer, and V-Guard.
Also, PM Saubhagya Yojana program aims at attaining 100 percent electrification by end of FY19. As many as 1.7 crore (40mn in FY14) households still don’t have an electricity connection will be positive for companies in cables, fan, and lightening.
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