DAILY VOICE | ICICI Bank, Axis Bank among 8 stocks that could benefit from Budget: Ashutosh Tiwari of Equirus Securities

Market Outlook

Ashutosh Tiwari, who has over 10 years of experience in capital markets, under his belt is of the view that Budget 2021 is positive for economic growth and investors should invest in quality stocks in the sectors mentioned above, he said in an interview with Moneycontrol’s Kshitij Anand.

Tiwari, Head of Research at Equirus Securities, said that Capital Goods, Industrials, Infra, Financials and Consumer Discretionary Sectors will benefit the most from the Budget proposals. Edited excerpts:

Q) Your first reaction to Nirmala Sitharaman landmark Budget. How would you rate the Budget on a scale of 1-5 and why (5 being the best)?

A) Finance Minister Smt Nirmala Sitharaman has clicked all the boxes in this budget. India needs job creation and by sharply increasing capital expenditure (34% higher than FY21 Budget estimates and 26% higher than revised estimates), the infrastructure segment will get a boost, which creates a lot of jobs at lower strata of society.

The government has not tinkered with taxes which was fear due to COVID impact and hence disposable income in hands of people and cash flows for corporates remain intact.

Q) Do you think the government managed its finances, and at the same time delivered a Budget that could boost growth?

A) Considering COVID’s impact on the economy, the government has compromised on fiscal deficit, but rightly so. During FY21, the fiscal deficit is expected at 9.5 percent and is provisioned at 6.8 percent during FY22.

However, the government has taken quite realistic assumptions on its revenue receipts and therefore unlikely to go beyond projected.

On the fiscal deficit side, the government now proposes to steadily go below 4.5 percent by FY26. A sharp increase in capital expenditure is likely to boost growth in the coming years.

Q) Which sectors are likely to benefit the most from the Budget and why?

A) A pick up in the infrastructure and construction space will be positive for employment as these sectors create more jobs for the lower strata of the society.

We believe that higher capital expenditure by the government along with PLI schemes (planned outlay of Rs 1.97tn over FY22-FY26) has the potential to spur India’s capex cycle and hence will be positive for Capital Goods, Industrials, Infra, Financials, and Consumer Discretionary Sectors

Q) Which sectors could lose because of Budget proposals and why?

A) Government has rationalised taxation of ULIP, it is proposed to allow tax exemption for maturity proceed of the ULIP having annual premium up to Rs 2.5 lacs.

So, in cases where the annual premium is more than 2.5lacs, now taxation will be similar to equity mutual funds and hence negative for insurance companies.

Q) Which stocks are likely to benefit the most from the Budget and why?

A) Companies from infrastructure, capital goods, industrial, financials sectors are likely to do well. Some of the stocks that we like are ICICI Bank, Axis Bank, KNR Construction, PNC Infra, HG Infra, Ahluwalia Contracts, ABB Power Products, KEC International.

Q) How should retail investors decode the Budget 2021?

A) Budget is positive for economic growth and hence should invest in quality stocks in the sectors mentioned above. We see more upside in mid and small-cap stocks.

Q) What should be the investment strategy post Budget 2021? Should investors use the dip to rejig their portfolio?

A) Markets are already cheered by budgets and baring some hiccups, we expect it to move upwards over the next one year. We would suggest investors focus more on Investment-related sectors mentioned above as manufacturing is likely to be the main driver of growth over the next 5 years.

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