Different Stocks that may Benefit from Budget 2022

Analysts’ top selections include infrastructure, rural development, and healthcare equities, as India’s government prepares to increase spending in a budget aimed at reviving investment and boosting the economy.

As policymakers seek methods to assist the economy out of the doldrums left by the pandemic, construction investment, notably on roads and ports, as well as incentives for electric mobility and renewable energy, Finance Minister Nirmala Sitharaman’s budget address on Tuesday is likely to be a focus.

With India’s equity benchmark falling amid a recent global sell-off sparked by concerns about the Federal Reserve’s impending rate hikes and foreign funds exiting the market, investors are looking for some relief from the budget statements.

However, since Prime Minister Narendra Modi took office in 2014, the benchmark S&P BSE Sensex has only risen in the month after the budget day in three of the last eight years. On the other five occasions, it declined or traded in a narrow range.

In a note, Neeraj Chadawar, head of quantitative equities analysis at Axis Securities Ltd., wrote, “The general focus of the budget is anticipated to be on job creation and investment-driven growth, signalling an encouraging boost to infrastructure development. Public infrastructure Capex will encompass roads, water, metro, trains, defence, digital infrastructure, and green technology.”

Here are the top sector and stock picks by some leading brokers:

Infrastructure

As the government continues to ramp up public spending to create jobs and stimulate the economy, a gauge of India’s top-30 corporations in roads, aviation, ports, shipping, railroads, and other utility services surged 36 percent in 2021, the highest gain since 2009. With increased spending on roads, military, water, housing, and trains, ICICI Direct expects the allocation to remain “buoyant.”

Polycab India, HG Infra Engineering, KNR Constructions, PNC Infratech, Larsen & Toubro, Thermax, KEI Industries, ABB India, Siemens India, Ramco Cements, UltraTech Cement, ACC, Ambuja, Bharat Dynamics, Bharat Electronics, NTPC, Container Corporation of India are among the best-known companies.

Renewable Energy/EV

Analysts anticipate a slew of support for infrastructure development for electric vehicles and renewable energy generation, in line with the government’s goal of lowering emissions and reliance on fossil fuels.

“Focus will be placed on sustainable technologies that provide specific benefits, to hasten the adoption of electric vehicles in India.” According to Chadawar of Axis Securities, “the EV charging infrastructure market is projected to receive a boost to further encourage EV adoption.”

Maruti Suzuki India, Tata Power, Adani Green, Hero Motocorp, Bajaj Auto, TVS Motors, Mahindra & Mahindra, Tata Motors, Minda Corporation, Gabriel India, Dixon Technologies, and Mahindra & Mahindra are among the top picks.

Rural/Agriculture

More aid for food processing, incentives tied to production, increased farm credits, and subsidies for fertilizers and crop protection, according to sell-side analysts, will continue to support agricultural and rural areas. Consumer goods companies facing higher input costs will profit from increased agriculture expenditure.

In a note, Goldman Sachs (India) Securities Pvt. analysts led by Santanu Sengupta wrote, “Given the backdrop of rising Covid cases, we believe policymakers will need to strike a balance between boosting rural demand and investing in infrastructure while continuing on the path of fiscal consolidation to maintain macro stability.”

PI Industries, Dhanuka Agritech, Rallis, Godrej Agrovet, Hindustan Unilever, Britannia, Dabur, and Nestle India are among the top options.

Health Care/Pharma

The government is anticipated to raise spending on corporations to improve production, as well as tax relief for individuals buying health insurance, easier access to medical treatment, and a generous push for drug development, as part of its focus on building healthcare infrastructure.

Apollo Hospitals, Narayana Healthcare, Shalby Ltd., Gland Pharma, Krishna Institute of Medical Sciences, Healthcare Global Enterprise, Max Health, HDFC Life, SBI Life, and the majority of pharmaceutical companies are among the top options.

Highlights

• According to analysts, the budget’s main highlight is a 35 percent rise in Capex, which follows a similar increase last year, indicating the government’s primary priority on manufacturing and infrastructure, which will immediately result in growth and employment.
• Manufacturing is a prominent issue on which the government focused with a sharp rise in Capex, and the government proceeded with its pro-growth initiatives mixed with some fiscal caution.
• Analysts said that expansion in the manufacturing sector will have a domino effect on other sectors, generating growth and employment.
• As the economy recovers from the pandemic, the government increased investment in infrastructure, transportation, and affordable housing to put growth on a more solid basis.