Last updated: 04 Feb, 2021 | 07:09 am
Impact on Equity
The stock markets have been on a high since the announcement of Union Budget 2021.The benchmark indices ended higher for the third straight session on Wednesday, buoyed by positive announcements in the Budget and better than expected Q3 results. The Budget is being viewed favourably by the markets mainly due to higher capex spending by the government & status quo on direct taxes and no incremental taxes on capital gains. Here are the likely sectors that could benefit from Union Budget 2022.
Sector specific impact
Accordingly, Global firm Morgan Stanley has upgraded share price targets for large private banks including HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank noting that these banks have emerged stronger post-crisis. The firm expects RoAs (return on assets) to cross previous peaks, which will drive multiples much above their long-term averages.
Besides, the FM also made announcements on the front of recapitalisation of PSU banks. She announced the PSU bank recapitalisation scheme of Rs 20,000 crore for FY22. This could be beneficial for state-owned banks.
There have been two major announcements which could impact stocks in the insurance sector.
ULIPs to be taxed: ULIP policies with a premium of more than Rs 2.5 lakh per annum to be taxable. In case the annual premium exceeds Rs. 2.5 lakh across all the ULIPs you have invested in, then there will no be no tax benefit going forward. This is applicable only for policies purchased after Feb 1, 2021.
This could negatively impact ICICI Prudential Life, as it generates more than 50% of its new business from ULIPs.
Increase in FDI limit to 74% in insurance may particularly be positive for HDFC Life.
The government has announced a sharp 34.5% YoY increase in Capex spending to Rs 5.54 lakh crore in FY22. Capex allocation for the nine core infrastructure sectors \u2013 civil aviation, new and renewable energy, power, railways, roads, shipping, rural development, urban development, and water resources is expected to increase 17% in FY22 as compared to the previous year.
Key infrastructure players such as Larsen & Toubro, KNR Constructions and IRB Infrastructure Developers are poised to benefit from this rise in infrastructure spending allocation. Global firm CLSA prefers stocks like L&T, UltraTech, NTPC, Power Grid and GAIL.
The government has extended the timeline for taking home loans and claiming additional tax deduction on interest payment till March 31st 2022. This bodes well for housing finance companies such as HDFC.
The vehicle scrappage policy which aims to replace commercial vehicles (CV) and passenger cars (PV) older than 15 years and 20 years of age, respectively, is expected to benefit CV manufacturers such as Ashok Leyland and Tata Motors and M&M, Maruti Suzuki in the Personal Vehicles space.
Target for Sensex raised
Global firm Morgan Stanley has raised the target for Sensex to 55,000 by Dec 2021, from 50,000 earlier saying that Budget 2021 augurs well for a new private investment cycle, a recovery in domestic equity flows and earnings growth. Premium over historical averages for the Sensex reflects a higher confidence in mid-term growth cycle.
Overall, the Budget has given priority to more fiscal support and spending with the hope that the resultant economic growth will offset the negative impact stemming from a higher deficit. The slew of measures announced for infrastructure and rural development should help to bring the economy back on track. No negative surprises in terms of taxation such as a higher LTCG or new surcharges have also given a boost to investor sentiment.