Budget 2024 Expectations: Insights from JM Financial and Their Impact on Key Stocks
As India anticipates the unveiling of the Union Budget on July 23, 2024, brokerage firm JM Financial has shared its expectations regarding the fiscal strategy, potential allocations, and the implications for major sectors and stocks. The Budget is expected to balance fiscal deficit targets, capital expenditure (capex) focused on economic growth, and social welfare initiatives.
Fiscal Strategy and Key Themes
Finance Minister Nirmala Sitharaman will present the first Budget of the Prime Minister Narendra Modi-led NDA 3.0 government. JM Financial outlines that the upcoming Budget aims to sustain a strategic equilibrium by addressing ongoing fiscal deficit concerns while simultaneously promoting capital expenditure.
According to their analysis, "From the upcoming Budget, we expect the government to strike a balance between fiscal deficit, capex for growth, and social spending.” The focus areas include infrastructure projects, rural economic revival, job creation, and the long-term vision for a ‘Viksit Bharat’ (Developed India) by 2047. The firm anticipates that the government will maintain the capital expenditure target of ₹11.1 lakh crore for the financial year, with ambitions to keep the fiscal deficit at 5.1% of GDP. This is a significant parameter, especially as the previous fiscal year’s target stood at 5.8%.
Capital Gain Tax Stability and Market Reactions
JM Financial posits that the maintenance of the current capital gains tax framework will likely generate positive sentiment within the stock market. There is heightened anticipation that any unfavorable modifications to capital gains tax could affect investor confidence.
"Markets would be keenly awaiting any adverse changes in the capital gain tax on equities. In case there is no change in capital gain tax, it would be considered positive for Indian equity markets," the report stated.
Sector-Specific Predictions
Agriculture, Fertilizers, and Chemicals
The firm anticipates substantial budget allocations in the agriculture sector, which they believe is critical for enhancing productivity and technology adoption. A suggested fertilizer subsidy reach of ₹1.64 lakh crore for FY25 could provide support in this area. Key benefactors identified include companies such as Coromandel International, Chambal Fertilizers, and Dhanuka Agritech.
Automobile Sector
Moreover, incentives and subsidies for rural areas might stimulate discretionary spending on two-wheelers and entry-level four-wheelers. JM Financial highlights companies such as Mahindra and Mahindra and Hero MotoCorp as potential beneficiaries. An increase in the FAME-III subsidy allocation could also lend support to Tata Motors and Ashok Leyland.
Banking, Financial Services, and Insurance (BFSI)
A robust initiative towards affordable housing in semi-urban and rural areas will benefit companies like Aavas Financiers and Aptus HFC. The banking sector is anticipated to gain traction through enhancements in fund flow to the renewable energy space, positively impacting stocks like ICICI Bank and HDFC Bank.
Cement and Infrastructure
The cement sector is expected to see uplift from increased allocations under the Pradhan Mantri Awas Yojana (PMAY), which aims to construct millions of rural homes. Stocks such as UltraTech Cement and Ambuja Cements may profit from this drive. Additionally, infrastructure spending is projected to rise, benefiting KNR Construction and PNC Infratech.
Fast-Moving Consumer Goods (FMCG)
Tax adjustments in favor of consumer income could lead to increased disposable income, positively influencing stocks like Dabur and Hindustan Unilever. Conversely, potential excise duty increases on tobacco products may negatively impact companies like ITC.
Conclusion
The expectations laid out by JM Financial underscore a strategic vision for India’s economic development aimed at maintaining fiscal discipline while addressing key areas of growth and welfare. As the nation awaits the Union Budget presentation, all eyes will be on how these projections translate into policies that directly affect various sectors and their respective stock performance.
Investors and market analysts are keenly observing these developments, hoping for announcements that will spur growth and foster economic resilience in the coming fiscal year.
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