Prashanth Tapse of Mehta Equities gives 9/10 rating to Budget 2021; LT, SBI, ITC among top 5 bets for 2021

Market Outlook

Finance Minister Nirmala Sitharaman announced game-changing steps in Union Budget 2021, which is on a right track to building future India with a focus on infra.

We have given a 9 out of 10 rating to the Budget.

Here are some of the proposal/amendments we like from Budget 2021:

1) Proposal to amend insurance act to raise the FDI limit to 74 percent. Positive for HDFC Life, SBI Life, ICICI Prudential Life.

2) Bad loans bank could help PSBs to offload more than Rs 3 lakh crore from their balance sheets and plans to pump in Rs 20,000 crore into banks. Positive for PSU Banks.

3) FY22 disinvestment target set at Rs 1.75 lakh crore. Positive for Container Corporation, IDBI Bank, BEML, LIC IPO in FY22.

4) Scrapping Policy: Voluntary Vehicle Scrapping Policy and Vehicles to undergo fitness tests after 20 years for passenger vehicles, 15 years for commercial vehicles. Positive Tata Motors & Ashok Leyland.

5) Mega investment textile park: Seven textile parks will be established over three years to make sector export competitive. Positive for KPR Mills, Arvind, Aarnav Fashion and Welspun India.

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6) First Digital Census in the History of India with an allocation of Rs 3,768 crore. Positive for Vakrangee.

7) Addition of 100 cities to the City Gas Distribution network. Positive for Indraprastha Gas, Mahanagar Gas, Gujarat Gas.

8) Increases in Railways spending: FY22 allocation for railways at Rs 1,10,055 crore. Providing Rs 1.15 lakh crore for Railways, privatising airports. Positive for RITES, IRFC, IRCON

9) Highway infra work proposal which includes building 8,500-km of highways by March 2022. Positive for IRB Infrastructure, Dilip Buildcon, Ashoka Buildcon.

10) Affordable Housing and Rental Housing: Additional deduction of Rs 1.5 lakh for loans taken upto March 31, 2022, for purchase of Affordable Housing. Tax Holiday extended by 1-year till March 2022 for developers of affordable housing. Positive for LIC Housing Finance, HUDCO

Advice to retail investors

Retail investors’ focus in 2021 should be on proper asset allocation with a good mix of cyclical and defensive stocks. We are optimistic on market for the coming year as almost all businesses have adjusted to the new normal and are back on track to 2020 level. Going ahead, the ground-level reality of the economy will drive the stock market momentum and investors are advised to keep booking profits as and when the market makes fresh near-term highs.

We suggest investors with suitable risk appetite to consider allocating 25-30 percent of funds in quality mid & small-caps.

Also Read: Union Budget 2021 | Market looks pleased, how to position your investments now?

Market Outlook

Going forward, the Indian market will be tracking global markets and earnings growth. On a close above 14,300, traders can expect a surge 14,690/15,044 in the short-term. We do expect the stock market to continue gains in 2021, as traders in domestic markets are seen simply riding this bullish optimistic wave as India is seen as a strong destination.

In the long term, the resumption of economic activity and the eradication of the coronavirus threat will dictate investor sentiment. Looking ahead, continued improvements in global risk appetite and better-than-expected corporate earnings will further boost Indian equities. Hence, we remain bullish in CY2021.

Stocks to hold in portfolio in 2021

1) L&T
2) SBI
3) ITC

5) Tata Motors

(The author is AVP Research at Mehta Equities)