Pro-Growth Budget to Benefit Some Sectors Most – 7 Stocks To Watch

Revival in the Economic Activities to Continue
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Breaking from the earlier trend, Finance Minister Nirmala Sitharaman, while presenting Union Budget 2023, did not come out with populist measures in the pre-election year and prioritises long-term growth. Attempts to consolidate the fiscal situation and push growth are visible in her entire budget speech.

Going by the Indian history of union budget, we have seen that first year and fourth year of budget usually remains quite populist in nature, and many freebies are announced for voters. Nevertheless, this budget rightly avoided the populist measures and concentrated on long-term growth. The budget has tried to strike some balance between fiscal consolidation and growth, by continuing its focus on capital expenditure and creating fiscal space for that by cutting revenue expenditure.

Capex Booster to Support Growth

Indian economy continues to show potential for world beating growth in the coming year and budget 2023 paves the way for yet another year, when the government is using the infrastructure capex tool to enhance the economic growth. But this time, the push is larger. The aim is to lift a post-pandemic domestic economy out of the woods and simultaneously crowd in private sector capex. Despite a slowing economy and, hence, slower growth in tax collections, in conjunction with the need to trim the fiscal deficit, capex has received its due. This will create demand for construction equipment and create jobs, apart from removing the infrastructure bottlenecks.

Capital Investment Outlay

Capital investment outlay is being increased steeply for the third year in a row by 33% to Rs 10 lakh crore, which would be 3.3% of GDP. Effective Capital Expenditure of the Centre is budgeted at Rs 13.7 lakh crore which will be 4.5% of GDP. In addition to this, free loans to state governments have been continued for an additional year to incentivize them for investments in infrastructure. Besides this capital outlay of Rs 2.40 lakh crore has been provided for the Railways. What will also help infra is 100 critical transport infrastructure projects that will be done on priority for end to end connectivity for ports, coal, and steel, fertilizer, and food grains sectors. Besides, railways and roads 50 additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional connectivity.

The newly established Infrastructure Finance Secretariat will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources.

Capex spending is good because it has a multiplier effect. It is said that every rupee spent on capex has a multiplier of Rs 3 as compared to just about Rs 0.9 for revenue expenditure. That apart, higher capex also creates jobs, which again will boost consumption.

USD 5 Trillion Economy

This budget lays foundation for India’s development path to become a USD 5 trillion economy.

Government is trying to lift the productive capacity of the economy through higher infrastructure spend, rather than directly boost consumption in a broad-based manner in a pre-election year.

Recent macro numbers including Core Infra, GST collections, IIP, Inflation etc. show that the economy is on the path to accelerated growth. The new savings scheme and enhanced limit of Senior Citizen savings scheme affords more avenues for savers to invest their monies safely and productively. Though the current fiscal has witnessed a broad-based recovery and resilient domestic demand so far, headwinds from slowing global growth and tighter financial conditions threaten to hurt the country’s economic prospects in fiscal 2024.

& the Stock Markets

The stock markets will now look forward to the other triggers for moving from now on – foremost, Reserve Bank of India MPC meet outcome and the balance Q3FY23 corporate results. China post the reopening has been attracting more FPI funds and negative news flow on one of the most important  corporate groups, Adani, has impacted sentiments across the board. We believe the revised FY24 earnings forecasts for corporates and the Nifty could drive the markets over the next few quarters.

Based on announcement made in the Union Budget 2023, we believe there are certain companies that are likely to gain more than others. In the following pages we give you carefully selected such seven companies from different sectors that you can take exposure to benefit from the budget announcement.

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About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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