With the Union Budget scheduled for February 1, fund managers are focusing on potential game-changing announcements in several key sectors, including infrastructure, manufacturing, steel, consumption, and automobiles. As the government prepares to allocate resources for various sectors, here’s a breakdown of what experts are predicting for the upcoming budget and the stocks likely to benefit.
Infrastructure: Capital Spending to Boost Key Sectors
One of the central themes for the upcoming budget is the government’s commitment to capital expenditure, expected to exceed Rs 11 lakh crore. This substantial spending is anticipated to benefit infrastructure sectors such as railways, roads, construction, and cement. Kunal Shah, Senior Research Analyst at Carnelian Asset Management, believes this focus on infrastructure will fuel growth but notes the challenge of balancing fiscal deficit targets with socialist and capitalist priorities.
Stocks to Watch:
- L&T
- KEC International
- HG Infra Engineering
Steel: Protecting Domestic Industry with Higher Import Duties
The steel sector is likely to benefit from an increase in import duties, a move aimed at protecting domestic producers from cheaper imported steel. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explains that Chinese steel makers have been flooding the Indian market with low-cost steel, forcing local companies to lower their prices and impacting profit margins. A higher import duty would force Chinese companies to raise prices, which could benefit Indian steel producers in the short term.
Stocks to Watch:
- JSW Steel
- Tata Steel
- Jindal Steel & Power
Manufacturing: Government’s Continued Focus on Growth
The government’s efforts to boost India’s manufacturing sector, especially with initiatives like the Production Linked Incentive (PLI) scheme, are expected to continue. Shah predicts that targeted incentives for sectors such as electronics and textiles, alongside further trade restrictions, will strengthen India’s manufacturing ecosystem. The PLI scheme has already helped make India the second-largest mobile phone producer globally, and more initiatives are expected to support growth.
Stocks to Watch:
- Dixon Technologies
- Arvind Mills
- KPR Mills
Consumption: Potential Tax Changes and Boost to Demand
In the consumption sector, analysts expect a mid-to-high single-digit increase in cigarette taxes, along with higher budgetary allocations for schemes like the PM Awas Yojana. There is also speculation that the government could adjust tax slabs for the middle class, which could boost consumption demand in the short term. However, Aniruddha Sarkar, CIO and Portfolio Manager at Quest Investment Advisors, cautions that raising tax slabs alone may not significantly impact long-term consumption trends.
Stocks to Watch:
- ITC
- Hindustan Unilever (HUL)
Automobile: Focus on Electric Vehicles and Rural Support
The auto sector is expected to receive a boost from government allocations under the PM E-Drive and the Auto PLI Policy, aimed at encouraging the localization of electric vehicle (EV) components. Additionally, tax cuts or increased funding for rural schemes like MGNREGA could support auto sales, along with enhanced tax breaks for housing loans and increased allocations for housing. These measures would contribute to growth in the auto sector, especially in the electric vehicle segment.
Stocks to Watch:
- Bajaj Auto
- Maruti Suzuki
- Tata Motors
A Budget with Growth Potential for Key Sectors
As fund managers prepare for the Union Budget, the focus remains on sectors that have the potential for significant growth. The government’s emphasis on infrastructure, steel protection, manufacturing incentives, consumption boosts, and the electric vehicle push reflects a comprehensive approach to driving India’s economic growth. Investors should keep a close watch on these sectors for potential opportunities.
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