Rural development, infrastructure, and health care stocks are among the analyst’s top picks for stores in India as the government prepares to ramp up spending in its budget that aims to kickstart investments to spur growth.
Construction spending, which includes ports and roads, along with incentives for electric mobility and renewable energy, is likely to be the main topic in the budget speech of Finance Minister Nirmala Sirtharaman.
Speech on Tuesday as policymakers look for ways to lift the economy out of the devastation caused due to the pandemic.
The equity benchmark in India is soaring in the wake of the global sell-off triggered by fears regarding the Federal Reserve’s impending rate hikes and foreign money fleeing markets. Investors are hoping that the budget announcements will provide some relief.
However, the standard S&P BSE Sensex has climbed in the month that follows the day of the budget in just three of the eight years since Prime Minister Narendra Modi took over in 2014.
It has fallen or traded rangebound in the other five instances.
“The overall focus of the budget is likely to be on job creation and investment-driven growth, implying encouraging thrust to infrastructure development,” Neeraj Chadawar, the head of research on quantitative equity in Axis Securities Ltd., said in a memo.
“This will include public infrastructure capex towards roads, water, metro, railways, defense, digital infrastructure, and green technologies.”
Here are the top sectors and stock picks from some top brokers:
Infrastructure
The top-ranked Indian companies operating in air, roads ports, ports, shipping railways, and other utilities increased by 36% in 2021.
This is the most significant growth since 2009, as governments continue to ramp up their public sector for jobs and spur growth.
ICICI Direct expects the allocation to be “buoyant” with higher spending on defense, roads, railways, housing, and water.
The top picks are Polycab India, HG Infra Engineering, KNR Constructions, PNC Infratech, Larsen & Toubro, Thermax, KEI Industries, ABB India, Siemens India, Ramco Cements, UltraTech Cement, ACC, Ambuja, Bharat Dynamics, Bharat Electronics, NTPC, Container Corporation of India.
Renewable Energy/EV
In keeping with the government’s goal of cutting emissions and reducing dependence on fossil fuels, experts anticipate lots of funding for infrastructure development for electric vehicles and the generation of green power.
“Thrust is expected to focus on sustainable technologies, with advantages aimed at speeding up the use of EVs in India.
Furthermore, there is a chance that EV charging infrastructure is expected to get an increase to help support EV adoption,” according to Chadawar of Axis Securities.
Top picks include Maruti Suzuki India, Tata Power, Adani Green, Hero Motocorp, Bajaj Auto, TVS Motors, Mahindra & Mahindra, Tata Motors, Minda Corporation, Gabriel India, Dixon Technologies.
Rural/Agriculture
Sell-side analysts anticipate ongoing support for farmers and rural areas by increasing assistance for food processing and incentives that are tied to production, in addition to higher farm credit and incentives for fertilizers and crop protection.
A rise in spending by the agricultural industry will help consumer goods firms suffering from higher input costs.
“Given the backdrop of rising Covid cases, we think that policy makers will need to strike a balance between boosting rural demand and investing in infrastructure while continuing on the path of fiscal consolidation to maintain macro stability,” Goldman Sachs (India) Securities Pvt. analysts headed by Santanu Sengupta, wrote in an article.
The top picks are PI Industries, Dhanuka Agritech, Rallis, Godrej Agrovet, Hindustan Unilever, Britannia, Dabur, and Nestle India.
Health Care/Pharma
In line with its ongoing emphasis on improving the health infrastructure, The government is expected to increase the amount of money it spends on companies to increase production and also provide tax relief for those who purchase health insurance, greater access to medical treatment, and a hefty boost to research into drugs.
The top picks are Apollo Hospitals, Narayana Healthcare, Shalby Ltd., Gland Pharma, Krishna Institute of Medical Sciences, Healthcare Global Enterprise, Max Health, HDFC Life, SBI Life, and the majority of drug makers.
Note: Brokers that were that were surveyed for top sector picks are: Axis Securities, Religare Broking Ltd., ICICI Securities Ltd., and BofA Securities.
