Budget 2024: Top 5 sector-specific expected announcements and likely impact

As Finance Minister Nirmala Sitharaman will present the Union Budget 2024-25 speech on Tuesday, marking the first significant policy announcement of Prime Minister Narendra Modi's third five-year term, the Budget could signal shifts in economic priorities.

Following a surprising election result that saw PM Modi-led National Democratic Alliance ( NDA) return to power, the government is anticipated to stimulate consumption in Asia's third-largest economy. This could be achieved by reducing personal taxes or increasing spending in consumer-focused areas.

While these measures might benefit consumer goods makers, real estate and housing finance firms, as well as infrastructure and auto companies, some sectors might face challenges, as per brokerages.

Following are the predicted sector-specific winners and losers:

Rural-Linked Sectors

The government is likely to allocate more funds to rural schemes to boost consumption, benefiting consumer goods makers like Hindustan Unilever and two-wheeler manufacturers like TVS Motor and Hero MotoCorp, according to Citi. Additionally, a minimal increase in tobacco taxes (less than 5 per cent - 7 per cent ) could positively impact ITC, the largest cigarette maker in India, as noted by Jefferies.

Real Estate

The budget is expected to increase funding for affordable housing, which would benefit developers such as Macrotech Developers and Sunteck Realty, as per Citi. An interest subsidy scheme for urban housing could also boost financiers like Aavas Financiers and Home First Finance, according to Jefferies.

Automobile companies 

India has provided subsidies worth Rs 115 billion over five years to encourage electric vehicle (EV) adoption. Macquarie has put forth that the government will maintain the scope and duration of these subsidies in the new scheme, benefiting companies like Tata Motors, Ola Electric, Olectra Greentech, and JBM Auto. Conversely, fewer-than-expected EV subsidies could favor Maruti Suzuki, which focuses on hybrid cars over pure EVs.

Manufacturing

HSBC expects the continuation of production-linked incentive schemes designed to boost local manufacturing and job creation. This will benefit technology hardware, telecom equipment, electronics, and medical device manufacturers, including Dixon Technologies, Ideaforge Technology, and Biocon. Additionally, capital goods companies like Larsen & Toubro and infrastructure firms could gain from a likely rise in capital expenditure, as indicated by Jefferies.

Trading

Any changes in capital gains tax, such as raising the holding period or tax rate, could negatively impact equities, as suggested by Morgan Stanley, though such changes are deemed unlikely. If enacted, these changes would increase the tax burden on equity and mutual fund investors, reducing the tax advantage over other asset classes. This could also lead to lower trading volumes, affecting brokerages like Motilal Oswal , ICICI Securities  Angel One, and 5 Paisa, as per Reuters report citing Morgan Stanley. 

Association of Mutual Fund in India ( AMFI) has requested that mutual fund units be exempted from long-term capital gains tax. Additionally, the government and regulators aim to regulate derivatives trading, viewed as risky and speculative. Any such measures, potentially through higher taxes, could weigh on the market, reduce trading volumes, and affect brokerages and trading platforms, according to Jefferies.

( With Reuters inputs)