After contracting sharply in the first half of 2020-21, India’s GDP is expected to bounce back in the third and fourth quarters. While several sectors of the economy have showed signs of revival, most other still remain adversely affected and are yet to get back on their feet.
“The government has a tightrope walk to do in this Budget. We see very limited scope to give incremental tax incentives, except for promoting manufacturing in the country,” brokerage firm Prabhudas Lilladher said in a note.
Here’s what analysts expect from the Budget for select sectors:
Healthcare: Most likely, this sector will get topmost priority in the Finance Minister’s agenda. Analysts expect higher allocation towards building a better healthcare infrastructure and for the ongoing vaccination drive. Prabhudas Lilladher expects allocation to this sector to jump 10 per cent to Rs 75,900 crore.
Stocks to watch: Apollo Hospitals, Cipla, Dr Reddy’s, Cadila Healthcare
Banking: Here the list of expectations is long. Investors expect the government to provide higher allocation towards recapitalisation of PSU banks, given RBI’s warnings about banks’ capital erosion due to the Covid impact. Investors will also look out for any announcement on creation of a development finance institution as well as a bad bank.
Stocks to watch: All PSU banks, SBI, IDBI Bank
Automobile: The top most item for the auto sector watchers will the announcement of the much-awaited scrappage policy, which may give some demand fillip to an ailing sector. Further, tractor and two-wheeler makers will expect increased allocation towards the rural economy. Prabhudas Lilladher expects more incentives for development of electric vehicles and their adoption.
Stocks to watch: M&M, two-wheeler makers, Tata Motors
Housing: Over the years, the government has given special attention to the real estate sector given the multiplier effect it can have on the economy. Analysts expect enhanced allocation to affordable housing, extension of tax holiday for affordable housing projects till next year and a likely enhanced leeway on housing loans under the Income-Tax Act.
Stocks to watch: Brigade Enterprises, Sunteck Realty, HDFC, home finance companies
Insurance: Analysts expect the government to increase foreign direct investment limit in the sector to 74 per cent from 49 per cent currently with the retention of management in the hands of the Indian entity. Further, they expect the government to offer a special leeway for insurance retirement plans under the income-tax rules on par with those enjoyed by the National Pension Scheme.
Stocks to watch: SBI Life, HDFC Life, Bajaj Finserv
FMCG: For ITC, no news of potential cess hike on tobacco products and the proposed new cigarette policy will be good news. Besides that, the industry will be hoping for incentives for the food processing industry, which got some attention during the pandemic. If the government does go in for a hike in import duty on gold, it will be negative for jewellers, said Credit Suisse.
Stock to watch: ITC, Nestle India, Titan Company
Metals/Electronics/Chemicals: With the government’s focus on self-reliance and promoting Indian industries, these sectors will be hoping for further government support in terms of anti-dumping duty, import duties and production-linked incentives in the Budget.