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Union Budget 2022: Budget Expectation from different sectors

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Budget 2022 sector expectations

The Budget is just a week away. As an investor, you must be eagerly waiting for it. Even though the impact of the Union budget has been reduced on the equity market in the previous years, the budget is still an important event for investors. Let us look at different sectors and what to expect from them.

Auto & Ancillaries 

  • It is expected that the government will come up with policies to boost sustainable technologies and green vehicle adoption will be part of policies. It is also expected that the government will accelerate the adoption of EVs in India.
  • The government has already announced PLI schemes and it is expected to make additional efforts towards boosting technology adoption.
  • For the commercial vehicle industry, execution of the Scrappage Policy and increased spending for infrastructure projects will be taken as positive.
  • Reduced and uniform GST rates (18%) on auto components to minimize the issue of grey operations and counterfeits due to the high (28%) GST rate.

Stocks in focus -  Hero MotoCorp, Bajaj Auto, Escorts, Ashok Leyland, Minda Industries.

Agriculture and Specialty Chemicals

  • The government to give a good fertilizer subsidy. This year it is expected the government to give a higher subsidy compared to last year. A higher subsidy will compensate fertilizers companies for selling products at lower than market prices to farmers.
  • PLI schemes to have chemical industries as well. Also, the government to extend financial support or incentives for capacity addition to reduce dependence on imports.
  • Chemical companies to get relief by a change in customs duty for raw materials and intermediates to boost domestic production.
  • Any relief or push to the infrastructure and the housing sector may prove to be beneficial for the chemical companies catering to the paints & coatings segment.

Stocks in focus - PI Industries, Dhanuka Agritechh, and companies in the specialty chemical sector

BFSI

  • A clear roadmap on the privatization of PSU is expected in the budget. Any news around privatization will be positive news for them.
  • For Housing Finance, the government may extend the PMAY-CLSS scheme in-line with the government’s vision to provide Housing for All by 2022 as the pandemic has resulted in project delays.
  • For the MSME sector, Rebate in taxation, simplifying investment, and offering further incentives to MSMEs is expected from the finance minister.

Stocks in focus - PSU Banks and Housing Finance companies

Insurance 

  • Health insurance and other insurance products have become important because of the pandemic. It is expected the government may also look at providing further tax incentives to enable people to buy adequate health insurance.
  • A separate bucket for investment in life insurance for tax rebates under section 80C is expected.

Stocks in focus - Insurance companies

Cement

  • Increase in the fund for the government schemes like Pradhan Mantri Awas Yojna and MNREGA. It will increase cement consumption in the country.
  • Government to keep interest in home loans, extend tax holidays on profits from affordable housing projects is expected.
  • income tax deduction on housing loan interest to increase from the present Rs 2 Lc to Rs 3 Lc and extend Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana for middle-income groups.
  • Fast-tracking of major highway projects is expected as the government is focused to develop the infra landscape of the country. Such initiatives will further create more demand for cement. 

Stocks in focus - ACC, JK Cement, Birla Corp, Dalmia Bharat Ltd.

Consumer Durables

  • Increase in the amount of standard deduction to salaried employees from current Rs 50,000 to Rs 1,00,000.
  • Bring down GST rates on consumer durables such as TV and AC from 28% to 18%.

Stocks in focus - Amber Enterprises, Dixon Technologies, Polycab India, and Sheela Foam

FMCG and Retail

  • Investments in digital infrastructure, job creation, MSME development, and skill up-gradation indirectly reignite consumption spending.
  • Relaxation of production targets in the recently announced PLI scheme for food and textiles.
  • Raising Excise Duty on cigarettes and tobacco products will be negative for certain companies operating in these sectors.

Stocks in focus - Dabur, HUL, Emami, Nestle, Britannia, ITC, and VST Industriess.

Infrastructure

  • Higher allocation (25% to 30%) to the Ministry of Road Transport and Highways.
  • The infrastructure space is at the inflection point with both central and state governments focusing on ambitious infra projects to stimulate growth. Moreover, the Capex cycle is coming back. The government has articulated renewable energy, roadways, railways, and water sources to be notable targets for the expansion of CAPEX layout.

Stocks in focus -  KNR Construction, PNC Infratech, and  H.G. Infra Engineering

Metals and Mining

  • The steel price has increased in recent months and has impacted the MSME sector. The government in the last budget reduced the basic customs duty on steel imports. In the upcoming budget, the government is likely to keep it the same or further reduce it.
  • The Indian Steel Association (ISA) wants the basic customs duty on Coking coal, Stainless Steel scrap, Nickel to be reduced to nil from the current 1%+1.5% agriculture cess since the availability of these input raw materials is very low.

Stocks in focus - SAIL, and Hindalco

Pharma 

  • The government came up with a PLI scheme for the pharma sector and also introduced incentives for novel drug R&D.
  • Government to widen the scope of Section 80D to allow all age groups a deduction for expenditure incurred on medical treatment of Covid-19 for themselves or family members.
  • Raise public investment in healthcare infrastructure from the current 1.29% of GDP.

Stocks in focus - Gland Pharma, HCG, and KIMS

Textile

  • The Apparel Export Promotion Council (AEPC) expects the central government to encourage investment in green energy and eco-friendly technologies by offering tax benefits along with simplifying the clearance of import goods from FTA countries.
  • The apparel industry urges the government to abolish 5% import duty and impose an Export Duty as raw cotton has been steeply increasing. This will help stabilize the price of cotton in the domestic market.

Stocks in news - Welspun India, Indo Count, Trident, Gokaldas Exports

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