The FY23 budget reaffirms the government’s stated objective of fiscal consolidation and capex-driven growth. Bond yields rose on concerns about a larger lending program. According to Jefferies, equity market sentiment and rising yields in particular for NBFCs are negative, while capital goods, cement, pipe companies are the beneficiaries of the budget announcements.
jefferies’ top stock picks And after the announcements of Sector Budget 2022 –
Capex/Infra: The 15% year-on-year growth in capex outlay spend (BE versus RE) is positive for the sector, which includes L&T and other companies. In addition, data centers achieving infrastructure status point to the prospects for a tax holiday — a positive for Siemens, ABB. Defense spending grew 10% annually which is positive for Bharat Electronics and L&T.
ITC (Positive)The tax on cigarettes has been kept unchanged in the Union Budget. The spurt in GST trends, with the highest ever collection in January-22, is also positive as there should be no urgency to tinker with the GST rate (cess) on tobacco, it highlighted.
titan (positive)Customs duty on cut and polished diamonds and gems is being reduced from 7.5% to 5%, a positive for Titan, which accounts for about 30% of inlaid jewelry sales.
pipe companiesSupreme, Astral and Finolex Industries will benefit from 33 per cent increase in the budget for piped drinking water scheme.
RIL: The extension of the PLI plan benefits to $2 billion for solar cell manufacturing and the extension of the deadline to FY24 to establish new manufacturing capacity is positive.
Financial: On the financial sector side, the key announcement in the budget was the extension of the ECLG scheme by one year till March 2023, which could be marginally positive for the lenders of this segment, though the risk in this segment is small. Jefferies said capital spending will also be positive for lending opportunities for banks.
“The major downside from the Budget is higher than expected government borrowing program and lack of comments on attracting foreign investment, this could lead to further increase in bond yields, which is more negative for PSU banks and Kotak Bank (in terms of MTM). loss on G-Sec bond book) as well as NBFCs,” the note added.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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