Budget 2024: Finance Minister Nirmala Sitharaman is all set to present India’s budget for FY25 on July 23, marking Modi 3.0’s first one.
Following an unexpected election outcome that returned Modi’s party to power with coalition support, a mammoth of expectations loom over the future of Asia’s third-largest economy, whether or not personal taxes be reduced or perhaps will Modi government will increase spending on consumer-focused sectors.
Industries like consumer goods, real estate, housing finance, infrastructure, and automobiles, according to brokerage firms, may be benefitted by a stimulation in consumption. However, certain sectors may face challenges.
Here are some of the likely winners and losers in the forthcoming budget.
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RURAL-LINKED SECTORS
The government is likely to allocate more funds to rural schemes to boost consumption, benefiting companies such as Hindustan Unilever, TVS Motor, Hero MotoCorp, Reuters said in its report citing Citi.
According to Jefferies, as reported by Reuters, a less than 5-7 per cent increase in tobacco taxes could be a positive for the country’s largest cigarette maker, ITC.
MANUFACTURING
According to HSBC, the expected continuation of production-linked incentive schemes, designed to stimulate local manufacturing and job creation, is likely to benefit companies such as Dixon Technologies, Ideaforge Technology, and Biocon.
Further, capital goods firms like Larsen & Toubro could also profit from increased capital expenditure in the fast approaching budget, Jefferies has said.
REAL ESTATE
Citi further said that with the government likely to increase allocations for affordable housing, this could favor developers like Macrotech Developers and Sunteck Realty.
Meanwhile,as per Jefferies, an interest subsidy scheme for urban housing might boost firms like Aavas Financiers and Home First Finance.
AUTOMAKERS
India has allocated subsidies totalling Rs 11,500 crore over five years to encourage the adoption of electric vehicles (EVs). Analysts at Macquarie, as cited by Reuters, anticipate that the government will maintain both the amount and duration of these subsidies in its latest scheme.
This policy stance is expected to favor key players in the EV sector, including Tata Motors, the leading manufacturer of electric cars in India, as well as upcoming IPO participant Ola Electric, known for e-scooters, and e-bus manufacturers Olectra Greentech and JBM Auto.
On the other hand, if EV subsidies are lower than anticipated, it could potentially benefit Maruti Suzuki, India’s largest car manufacturer, which has focused on hybrid vehicles rather than fully electric models.
TRADING
Morgan Stanley suggested that any adjustment to capital gains tax, such as extending the holding period or increasing the tax rate, could dampen equity markets, although it deems such changes unlikely, Reuters reported.
Should these adjustments be implemented, they would heighten the tax burden on investors in equities and mutual funds, eroding their tax advantages compared to other asset classes. Additionally, there is potential for decreased trading activity, which could impact brokerages like Motilal Oswal, ICICI Securities, Angel One, and 5 Paisa, among others.
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Meanwhile, India’s mutual fund association has advocated for exempting mutual fund units from long-term capital gains tax.
Regulators and the government also seek to curb derivatives trading, which has significantly influenced stock market growth since the COVID-19 pandemic, citing its speculative nature.
Jefferies has warned that such measures, including higher taxes, could suppress market activity and subsequently affect brokerages and trading platforms.
