Pick Your Gems Cautiously

The budget, as promised by the finance minister, is actually unprecedented with many bold steps undertaken, wherein, despite a big jolt by pandemic, FM came up with a lot of spending to drive the economy positively.  The fiscal deficit in this budget suggested for this year by the government stands at 6.6 per cent of the GDP. 

The budget has given growth direction to all the industries and incentivized different sectors. Major beneficiaries are companies that assist capital expenditure like L&T, ACE, BHEL, BEL, etc. The healthcare industry is another major beneficiary that has posted extraordinary profits in the last quarter. Tax holidays for IT companies bring cheer to the IT sector and major companies like HCL Tech, TCS, Infy would be a major benefit as the cost has also been reduced due to work from home culture.

Lots of incentives for housing and housing finance companies make them attractive companies like Godrej Housing and NBFC like LIC housing and HDFC would gain momentum in the next few quarters. With infrastructure and housing in vogue and the government’s push, ancillary industries like cement and steel would add to the development, and shares like Jindal steel, Tata Steel, Ambuja Cement, Shree Cement would also attract order book and will add to the cash flow of these companies increasing their valuations. 

One of the biggest highlights was the bad bank to consolidate NPAs of PSUs. There would be a lot of growth in the banking sector, which is the backbone of all spendings. Good growth is expected in ICICI bank and HDFC bank.  PSU banks would become a good buy once the bad bank is implemented, major beneficiaries would be SBI, IDBI Bank, and Bank of Baroda. 

The decrease in custom duty on gold and silver will add to customer spending and will be positive for Titan and other listed jewellery companies. The decrease in customs on scrap will also incentivise the Indian steel industry and other industries using base metals, which is good for all capital intensive companies.

This government had a thrust on ease of doing business from the very beginning.  In this regime, the government has shortened the span of reopening of direct tax assessment.  A promise to make GST smoother also adds to the vision of the government.

In short, we recommend investing in quality stocks that can benefit investors in the years to come. The overall budget has given guidance for the economic growth of the country. 

The author is Managing Director, Findoc Group

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.

*Kindly note the stocks mentioned in the article moved upwards between 15-30 per cent post the budget