Stocks in Focus: Finance Minister Nirmala Sitharaman will present her ninth consecutive Union Budget in the Lok Sabha on Sunday, February 1. Even though this day is Sunday, there will be a full trading session in the stock market.
In such a situation, the announcements made during the budget can have a direct impact on many sectors and stocks. Let us know which sectors and stocks can remain in focus during the budget speech of Finance Minister Nirmala Sitharaman.
Keep an eye on capital gains tax
The market has been demanding for a long time that there should be a cut in long term capital gains tax or securities transaction tax. If such an announcement is made in the budget, then all the shares related to the capital market can benefit from it, because it will increase the participation of investors.
Stocks like Motilal Oswal, Groww, Angel One, Anand Rathi Shares and Stock Brokers, Nuvama Wealth Management and 360 ONE WAM could benefit from such moves.
Textile and export sector
America has imposed 50% tariff on Indian exports. Its biggest impact has been on the textile sector. If tax exemptions or other incentives are given in the budget to support exports, then Gokaldas Exports, Welspun Living, Arvind, Indo Count Industries, KPR Mill and other textile stocks may get relief.
railway sector
Railway shares have fallen far below the record high made in mid-2024. It is expected that more funding may be announced for Railways in the budget, as is also possible for the defense sector.
Shares like Titagarh Rail, Texmaco Rail, BEML, RVNL, IRCON and RITES may benefit from higher allocation in Railways, announcement of new Vande Bharat and other trains. Higher capex may also increase financing opportunities for stocks like IRFC.
If spending on KAVACH and other safety systems increases, stocks like HBL Power, Kernex Microsystems, KEC International, CG Power, RailTel and Siemens will be in focus. Higher allocation for metro projects will also be positive for Siemens, ABB India, BEML and HUDCO.
auto sector
If there is an increase in the expenditure related to pay commission in the budget, then it may increase the demand. Stocks like Maruti Suzuki India, Hyundai Motor India, Tata Motors PV, Bajaj Auto, Hero MotoCorp and TVS Motor can benefit from this.
Goldman Sachs has already said that Maruti Suzuki could be the biggest beneficiary if pay commission is implemented.
Apart from this, announcements promoting electric vehicle infrastructure and energy storage will be good for Bajaj Auto, TVS Motor, Ola Electric, Tata Motors, M&M and JBM Auto.
Schemes to boost rural development, farmers’ income and strengthen the rural economy could support Hero MotoCorp, Bajaj Auto, TVS Motor and tractor companies like Mahindra & Mahindra, Swaraj Engines and Escorts Kubota.
The bank and NBFC sector will also be in focus during the budget speech on Sunday. If the MSME credit guarantee scheme is strengthened, lenders like SBI, PNB, HDFC Bank, ICICI Bank, Bajaj Finance and L&T Finance may benefit.
Announcements related to agriculture and rural income will also be positive for Shriram Finance, L&T Finance and M&M Financial Services.
If tax exemption is given on bank deposits, then stocks like SBI, HDFC Bank, ICICI Bank, Axis Bank, PNB, Bank of India, Bank of Baroda and Canara Bank will get direct benefits.
insurance sector
Reforms are already underway in the insurance sector and new announcements are expected in the budget. If section 80CCD is changed to include pension schemes of life insurance companies or separate tax exemption is given on term insurance, then HDFC Life, SBI Life, ICICI Prudential Life, Max Financial Services and LIC may benefit.
Increasing tax exemption under Section 80D in general insurance or inclusion of medical insurance in the new tax system will keep Star Health, Niva Bupa, ICICI Lombard and New India Assurance in focus.
However, if the new tax system is promoted more in place of the old tax system, then there may be pressure on stocks like LIC, HDFC Life, SBI Life, ICICI Prudential Life, Max Financial, ICICI Lombard and Star Health.
data centers
Data centers have been a big theme over the past year. If the budget takes steps to promote the growth of data centers, then stocks like Hitachi Energy, Siemens, Thermax, ABB India and GE Vernova T&D may benefit.
If incentives are given for setting up data centres, then there may be movement in stocks like Reliance Industries, L&T, TCS, Lodha, Netweb Technologies and E2E Networks.
Housing and Real Estate
The government’s focus has continuously been on affordable housing. If there is an announcement in the budget to promote affordable housing or expand the scope of its definition, then Aadhar Housing Finance, Aptus Value Finance, Aavas Financiers and Home First Finance can benefit.
Increasing tax exemption on home loans or reducing duty on construction materials may support stocks like Godrej Properties, DLF, Prestige Estates, Lodha, Brigade Enterprises and Sobha.
Paint and adhesive companies like Asian Paints, Berger Paints, Kansai Nerolac and Pidilite will also benefit from the strengthening of the housing sector.
Pharma and Healthcare
Higher tax exemption on R&D will be positive for stocks like Dr Reddy’s Laboratories, Sun Pharma, Biocon, Lupine and Glenmark Pharma.
If the scope of PLI scheme is extended to APIs, Aurobindo Pharma, Cohance Life, Dr Reddy’s, Sun Pharma and Cipla may benefit.
However, the expansion of Ayushman Bharat scheme may put pressure on hospital stocks like Apollo, Fortis Health, Max Health and Aster DM.
If medical tourism is promoted or import duty on life-saving medicines is reduced, Apollo Hospitals, Fortis, Narayana Health, Max Health and Aster DM may benefit.
Incentives related to medical device exports may bring stocks like Poly Medicure into focus.
Power and Renewable Energy
Renewable energy remains a major priority of the government. Higher allocation to solar and wind projects will be good for stocks like Tata Power, JSW Energy, Suzlon Energy and Torrent Power.
Tata Power can get special benefits from the emphasis on rooftop solar scheme.
Discom reforms will support Tata Power, Torrent Power and CESC, while the thrust on transmission networks will focus on Power Grid, IndiGrid InvIT and Power Grid InvIT.
Power financiers like REC, PFC and IREDA will also be in the news for increasing capex.
Other stocks which will remain on the radar
Dixon Technologies will keep an eye on any announcement related to the mobile PLI scheme. Along with auto, consumer durable stocks like LG Electronics India, Voltas, Blue Star, Bajaj Electricals and Crompton Consumer may benefit from increase in expenses related to pay commission.
The emphasis on BharatNet program will be positive for wire and cable companies like Havells, KEI Industries and Polycab.
Changes in excise duty on petrol, diesel and CNG will keep stocks like HPCL, BPCL, IOC along with IGL, MGL and Gujarat Gas in focus. Announcements related to LPG subsidy and under-recovery will also be important for OMCs.
Capital goods stocks like Siemens, ABB and CG Power will be under watch due to increase in capex. At the same time, emphasis on supercritical power projects and nuclear reactors can be beneficial for BHEL.
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