Budget 2024 expectations: JM Financial lists wish list and major stocks to be impacted

Budget 2024 expectations: The upcoming Budget will be aimed at striking a balance between fiscal deficit, capital expenditure (capex) for economic growth and measures to facilitate social welfare, according to brokerage firm JM Financial.

The Union Finance Minister Nirmala Sitharaman will present the first Budget of Prime Minister Narendra Modi-led NDA 3.0 on Tuesday, July 23.

"From the upcoming Budget, we expect the government to strike a balance between fiscal deficit, capex for growth and social spending. The continuation of the existing capex agenda (infrastructure, railways, defence, renewable/clean energy), higher budgetary allocation to revive the rural economy, job creation and roadmap for the 'Viksit Bharat' by 2047 would be the key theme for the Union Budget 2024-25," said JM Financial.

From the perspective of the Indian stock market, a no change in the capital gain tax may be positive.

"Markets would be keenly awaiting any adverse changes in the capital gain tax on equities. In case there is no change in capital gain tax, it would be considered positive for Indian equity markets," said the brokerage firm.

JM Financial believes the government will keep its capex and fiscal deficit targets for the current financial year, which was announced during the Interim Budget in February.

"The government is likely to continue its capex plan of ₹11.1 lakh crore for FY25 as announced in the interim budget with an aim to keep the fiscal deficit target unchanged at 5.1 per cent of GDP versus 5.8 per cent of GDP in FY24 to reach 4.5 per cent of GDP in FY26E," said JM Financial.

"The government’s capex focus would remain on defence, railways and infrastructure development given government vision of 'Viksit Bharat' by 2047. Continuing a pro-reform agenda, such as PLI schemes and incentivising clean energy, would aid in reviving private capex and job creation," said the brokerage firm.

The brokerage firm believes the government may spend the record RBI dividend of ₹2.11 lakh crore on welfare measures to revive the rural economy with higher spending on government programmes like the Pradhan Mantri Awas Yojana (housing for all) and PM Kisan (financial support for farmers).

Potential government welfare schemes and recent moderation in inflation will augur well for a recovery in the rural economy.

Sector-wise potential announcements and impact on key stocks

Agri, fertilizers and chemicals: JM Financial said a fertiliser subsidy provision of ₹1.64 lakh crore, as per the Interim Budget, seems adequate for FY25. The brokerage firm expects substantial budget allocations for accelerating technology adoption (like Nano urea), boosting productivity and improving storage infrastructure within the sector.

Moreover, there may be announcements about PLI schemes for the crop protection sector and battery chemical manufacturers.

As per the brokerage firm, these measures will be positive for stocks such as Coromandel International, Chambal Fertilizers, Madras Fertilizers, Sumitomo Chemical, Dhanuka Agritech, Insecticides India, PI Industries, Himadri Speciality, Gujarat Fluorochemicals and Neogen Chemicals.

Auto and ancillaries: JM Financial said incentives and subsidies to the agricultural sector would support rural discretionary spending and benefit rural-focused two-wheelers and entry-level four-wheeler original equipment manufacturers. This will be positive for stocks such as Mahindra and Mahindra, and Hero MotoCorp.

There are also expectations of an increase in allocation to FAME-III subsidy, which will be positive for Ashok Leyland, Tata Motors, Hero MotoCorp and Servotech Power. A cut in CNG excise duty will augur well for Maruti Suzuki and Tata Motors, said JM Financial.

BFSI: Measures for benefiting and developing the affordable housing market, especially in semi-urban and rural areas, will have a positive impact on stocks such as Aavas Financiers, Aptus HFC, Home First and India Shelter, said the brokerage firm.

Tax relief on deposits into banks will be positive for the overall banking stocks and deposit-taking NBFCs.

Measures for enhancing and improving fund flows for the development of the power sector, especially in the renewable space, will be positive for REC, PFC and IREDA, said JM Financial.

Focus on enhancing capex and infrastructure development across sectors will be positive for ICICI Bank, Axis Bank, HDFC Bank, SBI, and Bank of Baroda. At the same time, a separate tax deduction limit for life insurance will be positive for life insurance companies, the brokerage firm said.

Cement: According to JM Financial, an increase in Budget allocation to PMAY scheme to build an additional 20 million rural houses over and above the 10th June Cabinet decision to build 30 million homes for urban and rural poor over the next five years will be positive for stocks such as UltraTech Cement, Ambuja Cements and Dalmia Bharat.

FMCG: The brokerage firm said tax cuts, expansions in the tax slab, or increases in the limits for tax-saving investments under Section 80C would increase disposable income. This will boost FMCG stocks such as Dabur, HUL, Godrej Consumer and Nestle.

JM Financial said that if the government increases excise duty or NCCD (National Calamity Contingent Duty) on cigarettes and tobacco products, it will be negative for ITC and Godfrey Phillip.

Industrial: The brokerage firm said a higher allocation for defence capital expenditure will be positive for Bharat Electronics and Hindustan Aeronautics, while higher capital spending on railway infrastructure will boost RVNL, Titagarh Rail System, IRCON, and BEML.

Infrastructure: According to JM Financial, infrastructure capital outlay could increase, which would be positive for KNR Construction, PNC Infratech, RITES, and Ahluwalia Contracts.

The brokerage firm said a dedicated allocation to large water projects like Jal Jeevan Mission, Nal Se Jal, and Inland Waterways Development will be positive for NCC, VA Tech Wabag, Finolex Industries, Ratnamani Metals, and Welspun Corp.

Metal and mining: JM Financial said higher budgetary allocation towards the construction and infrastructure sector would increase the domestic steel demand. Moreover, the government may also announce a reduction in import duty on raw materials or an increase in the basic customs duty on imported Chinese steel. These will boost Tata Steel, JSW Steel, SAIL, and JSPL stocks.

The brokerage firm said financial incentives or further announcements on PLI schemes for the exploration of critical minerals will be positive for Coal India, NALCO, and NMDC.

Oil and gas: A policy framework to boost gas consumption in India - gas under GST, likely subsidy for domestic PNG for low-income group people and potential cut in excise duty on CNG will be positive for IGL, MGL, Gujarat Gas and GAIL, JM Financial said.

Clarity on gradually ending windfall tax on crude oil and export tax on petroleum products will be positive for ONGC, Oil India, IOCL, BPCL and HPCL. On the other hand, potential incentives for clean energy like green hydrogen and CGB will be positive for RIL, GAIL, IOCL, BPCL and HPCL, said JM Financial.

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