While many are hoping for big bang reforms from the upcoming Union Budget, brokerage firms are not so enthusiastic. They say that given the challenging macro economic environment, both globally as well as locally, and limited resources available with the Centre, the Finance Ministry could focus on few sectors aimed at boosting rural consumption.
‘Little material fillip’ “We do not expect the Union Budget to act as a big equity market catalyst as it is unlikely to provide any material fillip to index earnings growth in the near term,” said Girish Pai, analyst at Nirmal Bang Institutional Equities.
Overall, the Budget will be more about consumption rather than investment with the Seventh Pay Commission materially outweighing any incremental capex, said Pai.
While the government’s biggest focus will remain on reining in the fiscal deficit target at 3.5 per cent by FY17, it still cannot afford to miss measures for boosting the rural economy that has been suffering from two consecutive droughts and lower minimum support prices, according to brokerages.
“We expect the Budget to focus on easing rural distress,” said Indranil Sen Gupta and Abhishek Gupta, economists at Bank of America Merrill Lynch. One of the measures to tackle the same will be to focus on schemes, such as Pradhan Mantri Krishi Sinchayee Yojana and Rashtriya Krishi Vikas Yojana.
Allocations for power, roads Though significant increase in allocations to the infrastructure sector is unlikely, the Centre is expected to take measures in areas such as power, roads and railways.
“The need of the hour in the infrastructure space is execution, more than substantial jump in budgetary allocation,” said Dhirendra Tiwari, head of research at Antique Stock Broking.
Simultaneously, there is also need to push reforms for public sector banks to serve the capital-guzzling infrastructure sector.
“Last year’s Budget unveiled several bold plans which we expect will be taken forward: improving the quality of spending (more capex), reforming public sector banks, pushing through key bills (the Bankruptcy Code, the Goods and Services Tax, RBI Amendment) and rationalising taxes,” said Pranjul Bhandari, Prithviraj Srinivas and Stuti Saksena, economists at HSBC Global Research.
Positive impacts: auto, banks Kotak Securities expects the Budget to have a positive impact on sectors, such as auto, banking/NBFCs, capital goods, cement, construction, metals & mining, oil & gas, paints, power, shipping and logistics.
Stocks such as HUL, Dabur, Hero MotoCorp and M&M, among others, could benefit from the Budget.