Factbox: Likely winners and losers from India's upcoming national budget

Motilal Oswal Financial Services

19/07/2024 11:47

By Bharath Rajeswaran
       BENGALURU, July 19 (Reuters) - India unveils its budget
on July 23 in the first major policy announcement of Prime
Minister Narendra Modi's third five-year term, which could usher
in changes to economic priorities.
    After a shock election result saw Modi's party returned to
power relying on allies, the government is expected to boost
consumption in Asia's third-largest economy by lowering personal
taxes or increasing spending on consumer-focused areas.
    While that could benefit consumer goods makers, real estate
and housing finance firms as well as infrastructure and auto
companies, some sectors could also stand to lose, said
brokerages.
    Here are some of their winners and losers.
    
    RURAL-LINKED SECTORS
    The government is expected to allocate more funds for rural
schemes to stimulate consumption, aiding consumer goods makers
like Hindustan Unilever  HLL.NS  and two-wheeler makers like TVS
Motor  TVSM.NS  and Hero MotoCorp  HROM.NS , according to Citi.
    A less than 5%-7% increase in tobacco taxes could be a
positive for ITC  ITC.NS , the country's largest cigarette
maker, according to Jefferies.
    
    REAL ESTATE
    The government is likely to allocate more funds for
affordable housing, benefitting developers such as Macrotech
Developers  MACE.NS  and Sunteck Realty  SUNT.NS , Citi said.
    Moreover, the introduction of an interest subsidy scheme for
urban housing would boost financiers like Aavas Financiers
 AVAS.NS  and Home First Finance  HOME.NS , said Jefferies.
    
    AUTOMAKERS
    India doled out subsidies worth 115 billion rupees ($1.38
billion) over five years to drive the adoption of electric
vehicles (EVs) and Macquarie expects the government to retain
both the quantum and tenure in its latest scheme.
    That could benefit Tata Motors  TAMO.NS , India's top e-car
maker, as well as IPO-bound e-scooter maker Ola Electric and
e-bus makers Olectra Greentech  OLEC.NS  and JBM Auto  JBMA.NS .
    Conversely, lesser-than-expected EV subsidies could benefit
Maruti Suzuki  MRTI.NS , India's highest-selling car maker and
one that has chosen to make hybrid cars over pure EVs.
    
    MANUFACTURING
    The push on production-linked incentive schemes, which
incentivises local manufacturing and creates jobs, is expected
to continue, according to HSBC.
    That will help manufacturers of technology hardware, telecom
equipment, electronics and medical devices among others, like
Dixon Technologies  DIXO.NS , Ideaforge Technology  IDEF.NS ,
Biocon  BION.NS . 
    Capital goods companies like Larsen & Toubro  LART.NS  and
infrastructure firms could benefit from the likely rise in
capital expenditure in the budget, according to Jefferies.
    
    TRADING
    Any change in capital gains tax -- either by raising the
holding period or tax rate -- could be a dampener for equities,
Morgan Stanley said, though it says such moves are unlikely.
    But, if enacted, they would increase the tax burden on
equity and mutual fund investors, eroding the tax advantage they
enjoy over investors in other asset classes.
    It could also lead to lower trading volumes, weighing on
brokerages Motilal Oswal  MOFS.NS , ICICI Securities  ICCI.NS ,
Angel One  ANGO.NS , 5 Paisa  PAIS.NS  among others.
    The country's mutual fund association has petitioned that
mutual fund units be exempted from long-term capital gains tax.
    The government and regulators also want to rein derivatives
trading -- which has largely powered the stock market's rally
since the COVID-19 pandemic -- calling it risky and speculative.
    Any move to do so, such as through higher taxes, will not
only weigh on the market but also reduce trading volumes and in
turn, affect brokerages and trading platforms, Jefferies said.
    
 

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What brokerages expect from India's national budget    https://reut.rs/4fmBJ2f
India's Nifty 50 outperforms other emerging markets    https://reut.rs/4bORE67
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 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio
D'Souza)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))