Analysts said the increase in capital expenditure and investments in infrastructure will benefit cement, capital goods and steel stocks, among others while investors may question the elevated multiples of consumption stocks given the lack of consumption-boosting measures. ET takes a look at how brokerages viewed the Union Budget:
Morgan Stanley
The budget has favoured a wider fiscal deficit with a view to spur growth through higher capital expenditure, said Morgan Stanley. It expects the RBI to start policy normalisation with a reverse repo rate hike in the February policy review followed by repo rate hikes from the April policy review.
Beneficiaries: New capex cycle augurs well for financials, discretionary consumption and industrials. The brokerage remains underweight on exporters and defensives and exporters.
IIFL
The capital expenditure growth was higher than the previous year and there is a continuation of the increase in transparency. IIFL highlighted that there was minimal thrust on consumption expenditure and little thrust on affordable housing. Higher market borrowings implies that along with normalisation, interest rates are headed higher, said IIFL.
Beneficiaries: IIFL said investors can buy private banks, State Bank of India, industrials and domestic cyclical stocks.
ICICI Securities
The Budget was pro-growth by being expansionary and focused on capital expenditure while ensuring inclusive development. The quality of spending continues to improve and revenue receipt expectations appear credible, the brokerage said.
Beneficiaries: Larsen & Toubro, NTPC, Power Grid, ONGC, UltraTech Cement, SBI, HDFC Bank, HDFC, SBI Life, Tata Motors, TVS Motors, Phoenix Mills, Greenpanel Industries, Alkem, Dr Reddy’s, Infosys, Dabur, Gujarat Fluorochemicals, Bharti Airtel and Ashok Leyland, among others.
Jefferies
The brokerage said the Budget has confirmed the government’s aim of fiscal consolidation along with capital expenditure-driven growth. There is little for immediate consumption growth in the Budget, according to Jefferies. The brokerage said rising yields on the back of the government’s large borrowing program is negative for equity market sentiment and non-banking finance companies in particular.
Beneficiaries: Larsen & Toubro (infra spend push, ABB and Siemens (data centres under infra), Cement, Reliance Industries, ITC, Pipe companies such as Supreme Astral and Finolex (33% increase in piped drinking water scheme).
CLSA
The Hong Kong-based brokerage said the budget was focused on capital expenditure led growth, with a focus on manufacturing and the new economy. The expansionary approach of the Budget led to a higher-than-expected fiscal deficit which may take the yields to 7.5% by March. Investors may question the elevated multiples of consumption names as no major consumption focused measures were announced.
Beneficiaries: Larsen & Toubro, UltraTech Cement, ITC, HAL, Bharat Forge, Ashok Leyland and banks to some extent.
