Budget 2021 - sectors to be in focus

The annual budget will be unveiled on February 1, with expectations that the government will boost spending to reboot an economy that's forecast to contract the most this year since 1952. With just 2days left for Union Budget 2021, Indian share markets are witnessing extreme volatility. In the week gone by, BSE Sensex went past the crucial 50,000 and Nifty 50 crossed the psychological level of 14,750. Benchmark indices ended the week on a flat note with a negative bias. Analysts expect this high volatility to continue for next couple weeks. Ahead of Budget, market watchers advise a few sectors and stocks which may remain in focus during this week.

Rural Economy

Rural India, where most of the nation's 1.3 billion citizens live, has been a relatively bright-spot during the pandemic, registering growth even while the rest of Asia's third-largest economy contracted. Increased spending to support incomes, including expanding an existing jobs program, would bolster rural demand, according to Vinay Khattar, head of research at Edelweiss Securities in Mumbai.

Beneficiaries would include fertilizer producers including UPL, farm equipment makers such as Mahindra & Mahindra and consumer goods producers including Hindustan Unilever and Godrej Consumer Products.

Automobiles

Analysts are expecting a long-discussed policy banning older vehicles to be unveiled with the budget.

That would bolster demand for an industry that's already been buoyed by a recent surge in sales. Automakers would also expect to see more details of a $20 billion government program to attract manufacturers, according to analysts at Jefferies India, led by Mahesh Nandurkar.

Potential beneficiaries include Tata Motors and Ashok Leyland.

Banks

Indian banks' balance sheets have been spared much damage from the pandemic thanks to a moratorium on loan repayments that ended in August. With that over, the central bank forecasts bad loans will climb to 13.5 per cent of lending by September 30, from 7.5 per cent last year.

Mergers and recapitalization bonds at state-controlled banks may be announced in the budget to contain risks, according to Citi analysts, who add that investors will welcome any hint of share sales or plans to consolidate the government's holdings in lenders.

The industry has a long expectation list including recapitalisation of PSU banks, a new bad bank to deal with the accumulated stress, and privatisation of some banks. Housing finance firms expect an extension of the CLSS scheme under PMAY. Other demands include tax incentives to enable people to buy adequate health insurance and an increase in the quantum and the timeline of the ECLGS scheme, which is part of the government's broader Atmanirbhar Bharat drive. Stocks in focus: All PSU banks, private banks, insurance and housing finance companies

IT

Dalal Street analysts are expecting exemption in the dividend distribution tax, which may benefit Indian IT companies that pay healthy dividends. Exemptions in the tax will encourage the overall IT sector. Stocks in focus: TCS, Infosys, HCL tech, Tech Mahindra and other IT services companies.

Infrastructure

As the pace of coronavirus infections slows, the bulk of new spending could go toward new roads, bridges, railways and ports rather than topping up funds to provide relief from the pandemic, Jefferies analysts wrote in a note.

A custom Bloomberg gauge of road builders including NCC Ltd. and IRB Infrastructure Ltd. has climbed 4 per cent since the start of the year, compared with a 0.7 per cent decline in the benchmark Sensex.

Watch cement companies such as Ultratech Cement Ltd. and Ambuja Cements, along with railways related firms including Container Corporation of India and BEML.

?(Courtesy : NDTV Profits & Financial Express)