Budget Expectations and Impact: The first general budget of Prime Minister Narendra Modi's third term will be presented on Tuesday, July 23. The government is expected to boost consumption in Asia's third-largest economy by reducing personal taxes or increasing spending on consumer-centric sectors. According to Reuters, brokerage firms said this may benefit consumer goods makers, real estate and housing finance firms as well as infra and auto companies, but some sectors may also suffer losses.
Rural-related sectors: According to Citi, the government is expected to allocate more funds for rural schemes to boost consumption. FMCG companies like Hindustan Unilever and two-wheeler manufacturers like TVS Motor and Hero MotoCorp can benefit from this. According to Jeffrey, an increase in tobacco tax of less than 5%-7% can be positive for ITC, the country's largest cigarette manufacturer.
Real Estate: Citi has said that the government can allocate more funds for affordable housing, which will benefit developers like Macrotech Developers and Sunteck Realty. Apart from this, Jeffrey has said that the introduction of interest subsidy scheme for urban housing will give a boost to companies like housing financiers and Home First Finance.
Automakers: India has provided subsidies worth Rs 115 billion over five years to drive electric vehicle (EV) adoption and Macquarie expects the government to retain both quantum and tenure in its latest scheme. This could benefit India's top e-car maker Tata Motors as well as IPO-bound e-scooter maker Ola Electric and e-bus makers Olectra Greentech and JBM Auto.
Conversely, lower-than-expected EV subsidies may benefit India's best-selling carmaker Maruti Suzuki, which has opted to make hybrid cars instead of pure EVs.
Manufacturing Sector: According to HSBC, the emphasis is expected to continue on production-linked incentive schemes, which encourage local manufacturing and create employment. This will help manufacturers of technology hardware, telecom equipment, electronics and medical devices like Dixon Technologies, IdeaForge Technology, Biocon. According to Jeffrey, capital goods companies like Larsen & Toubro and infra firms could benefit from the potential increase in capital expenditure in the Budget.
Trading: Morgan Stanley said any changes to capital gains tax – whether by extending the holding period or the tax rate – could be detrimental to equities, although such steps are unlikely. But, if implemented, it would increase the tax burden on equity and mutual fund investors, taking away the tax benefits they enjoy compared to investors in other asset classes. This may also reduce the trading volume, which may impact brokerage companies like Motilal Oswal, ICICI Securities, Angel One, 5 Paisa.
