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Union Budget 2023
Regarded as one of the best Budget in over a decade. Definitely the case in all of Honorable Prime Minister Shri Modi’s 9+ years of government.
The Modi government’s goals in the upcoming fiscal year of 2023–24 include growing capital expenditures (Capex) to fund the construction of roads, highways, and railway lines.
Modifications to the new income tax system that are more favorable to the middle class show that the administration intends for the previous tax regime to be phased out. The Finance Minister (FM) stayed the course on the fiscal deficit path in the budget, setting a target of 5.9% in FY 24 and sticking to it.
But, what exactly does the budget has? What impact does the same have on our economy and more specifically, the Indian Stock Market?
As you all are aware, On Feb 1st, we had our Budget. The annual budget of a country has a huge impact on the entire economy.
It’s like the government setting aside a certain portion of wealth dedicated towards certain sectors, thus boosting them for the year. Last year we saw the government’s huge capex towards infrastructure. Some 7.5 lakh crores. That gave a big push to all the infrastructure-oriented companies.
Top Sectors and Stocks to have on our Watchlist;
FMCG
Fast Moving Consumer Goods is a sector that’s essentially a basic consumption and want-based industry. So, the demand for FMCG will always be there. However, because an economic downturn could lead to a recession, consumption may decrease.
Not anymore, because the tax slab has been changed wherein, income up to Rs. 7 lakh is not taxable. Also, under the presumptive schemes of taxation. The business turnover limit has been raised from 2 crores to 3 crores, and in the case of specified professions, the limit has been raised from 50 lakhs to 75 lakhs.
You might be wondering what’s the relation between these two. Well, as said earlier, when taxes are reduced, the surplus income left in the hands of the general public has a higher probability of being spent on basic needs and necessities first. Any leftovers will be used for luxuries.
With that said, we can expect strong consumption from Indian households, which is good for FMCG companies.
Top 5 FMCG & Retail Companies Watchlist;
- Hindustan Unilever Ltd
- ITC Ltd
- Avenue Supermarts Ltd
- Dabur India Ltd
- Marico Ltd
Green Energy
This isn’t new; in fact, the present government has been keen in regard to the transition towards Green Energy. As a result, the Indian government has set aside 35,000 crores in Budget 2023 for the energy transition.
In fact, the government has specifically mentioned that “green growth” is one amongst the 7 priority sectors. India wishes to achieve Net zero greenhouse gas emissions by 2070. So, various efforts are being made to reduce carbon emissions and prioritize the adoption of green fuels.
Green hydrogen in particular is one of the cleanest sources of energy, with close to zero emissions. So, for the Union Budget 2023, the government has allocated, as part of the “Green Hydrogen Mission,” Rs. 19,700 crores.
We all know the CG’s interest towards Ethnol-based fuel (i.e., a flammable liquid, a byproduct of natural fermentation of Sugar) and also the hydrogen-based fuel. EV also from parts of this.
Top 5 Renewable Energy Companies Watchlist;
- Adani Green Energy Ltd
- Tata Power Company Ltd
- Shree Renuka Sugars Ltd
- KPI Green Energy Ltd
- Praj Industries Ltd
Infrastructure
Just as in the last budget, government interest towards infra hasn’t dialed down. When we talk about infra, in this budget the CG put more weightage on the housing. Thus allocated or will be allocating Rs. 10000 crores via the national housing bank towards the urban infra development.
By concentrating on Railways, Roadways, and Airways connectivity, the government gives a lot of importance towards the logistics and connectivity of entire India. This is both beneficial for the lending businesses and the infrastructure developers.
Also, for the Budget 2023, the government has allocated 2.4 lakh crores towards railway capex. Which is the highest-ever allocation. This is the best part of the present government. They’ve taken connecting the entire Indian landscape that much more seriously.
Also, same as last year, there’s this 50-year loan the CG will give to states absolutely interest-free to be spent on the state’s infrastructure.
The Union Budget also allocates a significant amount towards the PM Awas Yojana, wherein the contribution is 66% higher than last year, amounting to Rs. 79,000 crores.
Top 5 Infrastructure & Allied Companies Watchlist;
- UltraTech Cement Ltd
- Pidilite Industries Ltd
- Tata Steel Ltd
- IRCTC Ltd
- HDFC Ltd
Automobile
As previously stated, the government has allowed for a surplus in the hands of the general public through significant tax relief; this money will be used for various consumables. Which include Automobile (the purchase of cars, bikes, etc)
Usually, any positive note towards the Indian economy, such as the GDP growth, the tax relief, and such, so, its these consumer-based companies will benefit.
And, after the basics, Indians spend the most on their own vehicles. So, the automobile sector will surely benefit from the excess household savings due to the tax relief.
With that said, we can have a positive outlook on both the Automobile and the Auto ancillary industries.
Top 5 Automobile & Allied Companies Watchlist;
- Tata Motors Ltd
- Bajaj Auto Ltd
- Sona BLW Precision Forgings Ltd
- Bosch Ltd
- Eicher Motors Ltd
Agriculture
I don’t think there has been a budget that didn’t concentrate on the Indian Agriculture Sector.
I believe we are at an inflection point from agriculture being hard-working farmers to agriculture being in Startups, Big corporations, and such.
In the next 10 years, we’ll see pretty much all the big corporations doing end-to-end transactions as far as agricultural produce is concerned.
Budget 2023 has allocated 20 lakh crores in credit facilities for agriculture, with a focus on agricultural subsectors such as animal husbandry, dairy, fishing, and so on.
In addition, 1.75 lakh crores will be spent on fertilizer subsidies.
Top 5 Agriculture & Allied Companies Watchlist;
- ITC Ltd
- Coromandel International Ltd
- Fertilizers & Chemicals Travancore Ltd
- Godrej Agrovet Ltd
- Avanti Feeds Ltd
Tourism & Travel
In the Budget 2023, the FM has increased TCS, i.e, the tax collected at source from earlier 5% to now 20% on the overseas package. This will be an added burden for all international travelers.
On the brighter side, this may motivate Indians to travel domestically. Thus, Domestic Tourism may get a boost.
Not just that, the Indian CG has always been too keen on promoting Tourism. So, any companies that deal with Hotels, Travel, and such must be invested in keeping 5 + years in mind. I’m optimistic about the revival of the industry.
Top 5 Tourism & Travel Companies Watchlist;
- IRCTC Ltd
- Mahindra Holidays & Resorts India Ltd
- Indian Hotels Co Ltd
- ITDC Ltd
- Easy Trip Planners Ltd
Defence
The defence sector was the most spoken topic in the last budget. But in this budget, we didn’t notice anything new. Although the defence sector as a whole received one of the largest packages, amounting to Rs. 5.94 lakh crore, This benefits no one company in particular.
Since most of the Indian Defence-related companies that are listed in the Stock market are PSUs. I don’t see a significant increase or improvement in earnings. They are all slow growers. So, this is not a suggested choice for now.
Top 5 Defence Companies Watchlist;
- Hindustan Aeronautics Ltd
- Bharat Dynamics Ltd
- BEML Ltd
- Bharat Electronics Ltd
- MTAR Technologies Ltd
Pharmaceutical
The Centre has announced a new scheme to promote R&D and innovation in the pharma sector. Wherein, the Pharma companies will get additional tax benefits on its R&D expenses towards specific priority areas.
Other than this, I haven’t noticed any direct benefits as far as Budget 2023 is concerned. However, the pharmaceutical industry, particularly the API industry, is in a recovery phase, so we can expect a good return on investment in the next five years.
Also, Budget 2023 increased the allocation for Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to Rs 7200 crore, while Rs 646 crore has been allocated for the Ayushman Bharat Health Infrastructure Mission (PM-ABHIM).
Top 5 Pharma & Allied Companies Watchlist;
- Dr Reddys Laboratories Ltd
- Sun Pharmaceuticals Industries Ltd
- Cipla Ltd
- Divis Laboratories Ltd
- Gland Pharma Ltd
Conclusion:
India is a Growth story. Being one of the fastest growing economies in the world. Investors who invest in India in our Stock Market will benefit a lot. Mark my words: we are heading toward one of the biggest bull runs in history. Any drawbacks that we see today will seem small when we look at it from a 5, 10, or 15 years viewpoint.
Avoid all the noise out there. Invest in Indian Companies based on their Fundamentals. Consider the budget for 2023 and all the sectors that benefit from it, and invest accordingly.
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