Budget Impact: 10 stocks that stand to gain from FM’s announcements

• The Budget’s tax breaks, especially to the salaried class, are expected to lift consumer spending and benefit sectors like retail, FMCG and autos.
• A capital outlay of ₹2.4 lakh crore proposed for the railways sector in the budget will also aid metal companies.
• The proposal to set up 100 labs for development of applications using 5G services are positive for Reliance Jio and Bharti Airtel.

The rally in the markets post Finance Minister Nirmala Sitharaman’s speech says a lot about the budget that surprised investors positively.

After the bloodbath witnessed by the markets last week, the Union Budget brought a much-needed relief by giving the middle class a vital stimulus in the form of tax breaks.

The tax bonanza will increase the disposable income in the hands of the common taxpayer, boosting consumer spending and benefitting sectors like retail, FMCG and autos, analysts say.

Apart from a tax bonanza, the FM also proposed a capital expenditure outlay of ₹10 lakh crore for FY2024, up from ₹7.5 lakh crore last year. These and other announcements have given positive cues to metals, hotels, railway and top telecom companies.

Here are analysts’ top stocks that are expected to benefit from the budget announcements.
Source: NSE as on February 1

The proposal to set up 100 labs for development of applications using 5G services in areas including smart classrooms, healthcare and smart cities are positive for top two telecom companies like Reliance Jio and Bharti Airtel, says ICICI Securities.

A capital outlay of ₹2.4 lakh crore proposed for the railways sector in the budget will also aid metal companies, say analysts.

Positive on ITC despite surge in NCCD
Despite a 16% increase in national calamity contingent duty (NCCD) for certain cigarettes, analysts are positive the higher duty will not impact volumes much.

“We believe the surge in NCCD will not have a material impact on overall cigarette volume growth for the industry as it implies only a 1-2% price rise. We are positive on ITC and expect the volume growth for the company to remain stable, going ahead, “ said Preeyam Tolia, senior research analyst, FMCG & retail at Axis Securities.

Auto sector has lots to celebrate
Further, the auto industry also has a reason to celebrate since the budget has removed custom duty on capital goods imported for the manufacturing of lithium-ion batteries used in electric vehicles (EVs). The move is to reduce the cost of EVs in the country.

A proposed reduction of basic customs duty rates on goods other than agriculture and textiles from 21% to 13% is seen as another positive, while the relief in taxes is also expected to boost consumer spending by salaried consumers.

Also, the finance minister said that more funds would be allocated towards scrapping old vehicles by the central government.

"In addition to the vehicle scrappage policy announced in Budget 2021-22, more funds have been allocated now to support efforts to scrap old vehicles under the central government. States will also be supported to help them scrap old vehicles and old ambulances," said Sitharaman in her budget speech.

This is seen boosting the commercial vehicles industry.

The significantly higher capex allocation will support the commercial vehicles industry and will be positive for multi-axle vehicles and tippers, said Crisil.

“Increase in spending on infrastructure, setting up of 50 new airports and heliports, creation of 100 transport infrastructure projects are welcome moves, in addition to the central support for replacing old vehicles. All of these should drive consumption and overall demand of vehicles," said Banwari Lal Sharma, CEO, consumer business at CarTrade Tech.

Hotel stocks are among favourites
Shares of hotel companies rose on Wednesday after the finance minister announced that the government will promote tourism in the country.

"Promotion of tourism will be taken up on mission mode with the active participation of states, the convergence of government programs & public-private partnerships," said Sitharaman in her budget speech.

There is a large potential to be tapped in tourism. The sector holds huge opportunities for jobs and entrepreneurship for youths, she added.

“There is a huge thrust on the tourism sector in the budget. 50 domestic destinations will be selected and uplifted. Domestic tourism will be promoted as an alternative to international tourism. We have seen Samhi Hotels, Oyo, Ixigo planning their IPO in 2023. If you look at Easemytrip, which got listed in 2021 has created huge wealth for investors (and is) also announcing high growth in topline and bottomline,” said Manish Khanna, co-founder at Unlisted Assets.

The special push to the tourism sector is expected to bring more companies from the tourism sector to the listed space.

“We would see many companies in this sector going in for IPO from the unlisted space. Some of the burn companies like Oyo are also expected to be operationally profitable in FY23, which is a huge positive coming out from covid downturn,” said Khanna.

However, one thing that will have a negative impact on the tourism industry is the move to increase the tax collected at source (TCS) mandate from 5% to 20% on overseas tour packages.

“This will not only increase the upfront cash outflow for customers but will also give an unfair advantage to foreign-based online travel booking platforms over India-based travel agents and tour operators,” said Rajesh Magow, co-founder and group CEO of MakeMyTrip.


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