As the nation gears up for the Union Budget 2025, analysts anticipate a muted market reaction, with the government's focus expected to be on fiscal consolidation, infrastructure spending, and sector-specific incentives.
Capital expenditure growth below 15% could negatively impact industrial and engineering, procurement, and construction companies like Larsen & Toubro Ltd., said UBS and Jefferies.
Consumer discretionary spending could be boosted by income tax cuts, added Jefferies, and further mentioned that rural recovery may see positive sentiment from welfare scheme expansions.
Here's what the leading brokerage firms say:
Jefferies
Expansion of electronics production-linked incentives or semiconductor manufacturing schemes are positive for electronics manufacturing services stocks such as Syrma SGS Technology Ltd., Kaynes Technology India Ltd., and Amber Enterprises India Ltd.
Increase in renewable energy scheme allocations and tweaks in solar cell or module duties are awaited.
Meaningful income tax cut could be positive for consumer discretionary firms such as Jubilant FoodWorks Ltd. and Devyani International Ltd., retailers like Trent Ltd., consumer durables like V-Guard Industries Ltd. and Havells India Ltd., and automobile majors like Maruti Suzuki India Ltd.
Boost to welfare schemes can be sentimentally positive for further rural recovery, which can be positive for companies like TVS Motor Co. in two-wheelers, and UltraTech Cement in the cement sector.
However, less than 15% growth in government capex may be a negative for EPC contractors such as L&T and the broader industrial sector.
The brokerage expects potential hike in foreign portfolio investment limit in banks and insurance companies to 100%, up from the current 74%.
Expansion of the interest subsidy scheme for urban housing is expected, which can be a positive for affordable housing lenders like Home First Finance.
Tobacco taxation changes unlikely in this budget.
CLSA
Changes in taxation on tobacco products remain a key focus for ITC Ltd.
Any hike in excise duty on auto fuels may hit margins of Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp., while LPG subsidy in the budget may prove to be a relief.
Any cut in excise duty on CNG may drive a re-rating for Indraprastha Gas Ltd. and Mahanagar Gas Ltd.
Increased allocations for infrastructure projects and any hike in import duty on steel, and a cut in duty on coking coal could benefit steel producers.
Any move to attract more assesses into the new tax regime would be a negative for life insurance firms.
UBS
Impact of budget on markets would be muted.
Capex and consumption boost could be limited if the fiscal deficit needs to be contained at less than 4.5% of the gross domestic product in fiscal 2026.
Capex budget stands at around Rs 11 lakh crore—negative for L&T, core infrastructure, and capital goods companies.
Stake sales in public sector undertakings, including NMDC Steel Ltd., Shipping Corp. and BEML Ltd., are likely to be pushed forward in the coming fiscal.
Revenue collection is expected to marginally improve in line with the nominal GDP.
Key focus includes capex, consumption and employment but within fiscal boundaries.
If fiscal 2026 capex is budgeted at around Rs 11 lakh crore, similar to the current fiscal's budgeted capex, it would be negative for L&T.
The 10-year government bond yield is expected to decline to 6.25% in the coming fiscal.
Bank Of America
Fiscal deficit is set to dip to 4.5% of GDP.
Rising dilemma between fiscal prudence and growth needs.
Capex is prioritised, but capacity issues coming to the fore.
Revenue growth may maintain a steady pace.
Debt, not deficits, could be the 'mantra' going forward.
Fiscal policy easing likely to be on flow.
GDP growth partly hinges on a revival of capex spending.
Macquarie
No change to customs duty on gold.
Mid-to-high single digit increase in taxes on cigarettes.
Governments may impose import or safeguard duties to counteract the dumping of commodities from China.
Morgan Stanley
The impact of the budget on the market has been on a secular decline.
Market seems to be approaching the budget with skepticism.
Key things to watch are the extent of fiscal consolidation, physical and social infrastructure and sector-level incentives or spends.
Overweight on the financial, consumer discretionary, industrials and technology sectors.
Underweight on all other sectors.
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