Budget 2024 Expectations: JM Financial Outlines Wish List and Impacts on Major Stocks
As the date for the presentation of India’s Union Budget for 2024 approaches, anticipation builds among investors and market analysts alike. Brokerage firm JM Financial has released a comprehensive report outlining its expectations for the budget and the potential impact on various stock sectors. Set to be unveiled by Union Finance Minister Nirmala Sitharaman on July 23, the budget is expected to focus on balancing fiscal deficit, capital expenditure (capex), and social welfare initiatives.
A Balancing Act
According to JM Financial, the government aims to seamlessly balance the fiscal deficit with an increased capex plan while also bolstering social spending. The firm anticipates continuity in the existing capex agenda, which emphasizes infrastructure, defense, and clean energy projects, crucial for achieving the government’s long-term vision of a "Viksit Bharat" by 2047. "The government is likely to continue its capex plan of ₹11.1 lakh crore for FY25 as previously announced," noted JM Financial. The brokerage firm highlighted a commitment to maintain the fiscal deficit at 5.1% of GDP for the current financial year, down from 5.8% in FY24, with an eye on reaching 4.5% by FY26. ## Capital Gains Tax: A Critical Focus for Markets
Investor sentiment around the budget is particularly focused on potential changes to the capital gains tax. JM Financial indicated that maintaining the current tax structure could positively influence the Indian equity markets. "Markets would be keenly awaiting any adverse changes in the capital gain tax on equities. In case there is no change, it would be welcomed by investors," the firm stated.
Welfare Measures and Rural Economy
JM Financial also suggested that a record RBI dividend of ₹2.11 lakh crore could be allocated for welfare schemes aimed at revitalizing the rural economy. Increased spending on initiatives like the Pradhan Mantri Awas Yojana (housing for all) and PM Kisan (financial support for farmers) could provide a significant boost to the rural sector.
Sector-by-Sector Impact Analysis
Agriculture, Fertilizers, and Chemicals
The brokerage firm anticipates a provision for fertilizer subsidies of ₹1.64 lakh crore, viewed as adequate for FY25. This is likely to enhance technology adoption and improve infrastructure within the sector. Beneficiary stocks include Coromandel International, Chambal Fertilizers, and PI Industries.
Automotive Sector
Incentives for the agricultural sector are expected to fuel rural discretionary spending, benefitting major two-wheeler and entry-level four-wheeler manufacturers like Mahindra and Mahindra and Hero MotoCorp. Moreover, an increase in allocation for the FAME-III subsidy could bolster companies such as Tata Motors and Ashok Leyland.
Banking and Financial Services
With a focus on affordable housing, stocks like Aavas Financiers and Aptus HFC stand to benefit. Tax relief on bank deposits is seen as a boon for banking stocks, while improved fund flows for the renewable power sector may uplift REC, PFC, and IREDA.
Cement and Infrastructure
An increased budget allocation towards the Pradhan Mantri Awas Yojana could positively affect stocks of major cement companies including UltraTech Cement and Ambuja Cements. Businesses focusing on infrastructure development like KNR Construction and PNC Infratech may also see gains from increased capital outlay.
Consumer Goods
Potential tax cuts could expand disposable income, positively affecting FMCG companies such as Dabur, Hindustan Unilever, and Nestle. Conversely, any hike in excise duty on tobacco products might adversely impact ITC and Godfrey Phillips.
Industrial Sector
Higher allocations for defense capital expenditure are anticipated to benefit Bharat Electronics and Hindustan Aeronautics. Moreover, increased railway infrastructure spending could boost stocks like IRCON and Titagarh Rail System.
Conclusion
As the Union Budget presentation nears, JM Financial’s insights provide a roadmap for investors seeking to navigate the implications of the upcoming financial policies. With a focus on balanced fiscal management, social welfare, and robust sectoral growth, market participants are keenly poised to react to the unfolding developments in India’s economic landscape.
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