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6 mins read . 31 Jan 2023
One of the standard questions we all raise on Budget day is, what are the stocks to buy. Don’t be surprised if someone asks you for the top 5 shares to buy after the Union Budget announcement or the best stocks for 2023 based on the Union Budget. He we shall look at in detail on the justification for the top 5 stocks to buy post Budget 2023.
The top 5 shares to invest need not always be the top 5 dividend stocks, since growth is based on a different set of parameters altogether. On Budget day India, let us look at the impact of budget and stock markets and crystallize the 5 key stocks to buy in this market.
Our top 5 stocks to buy are from 3 themes. There is the defence theme, infrastructure theme and the divestment theme.
There are several likely triggers for Bharat Petroleum in Union Budget 2023. Firstly, we could see a new approach to divestment of BPCL in the current budget. Over the last 2 years, the government has been trying to hive off its majority stake in BPCL, but either the valuations were not right or the buyers were not right. Budget 2023, is likely to come out with a detailed plan for strategic sale of BPCL, more so if the IDBI Bank model works to perfection. In addition, the government is likely to allocate a total of Rs50,000 crore for FY23 as loss compensation to oil marketing companies and BPCL will be a key beneficiary. Combined with relatively lower oil prices, BPCL should get a boost in the Budget 2023.
Dixon Technologies operates in the consumer electronics outsourcing and end to end manufacturing process management. This sector is expecting a lot of positives from Union Budget 2023. For example, there are expectations that the GST rate on these products would be reduced from 18% to 12%, which would be a major boost for these consumer electronics companies. In addition, the PLI scheme is likely to be expanded for this space which shows a lot of potential for global outsourcing. This is likely to be one area of focus in this Budget.
Life Insurance is expecting a lot of additional things in Budget 2023, apart from the inflows from the IDBI Bank stake sale, likely to come in the year. LIC is expecting a number of market friendly announcements in the Union Budget, including expansion of the Section 80C limit, which normally is one of the biggest reasons why people buy life insurance companies in India. There have also been fears that the government may eventually withdraw its guarantee for LIC products, but the government is likely to use the budget as a forum to assure people that the guarantee will not go. That will also be a boost for LIC stock.
HAL has seen the stock price more than double in the last year or so and that has largely to do with the defence orders. Government has already reserved a chunk of the fresh orders for domestic defence companies and HAL is already a big beneficiary. Its order book position at nearly Rs84,000 crore is already more than 3 years of its sales. This budget is expected to add another Rs50,000 crore to its order book with more orders hived off to HAL. With stronger security needs on the borders, the demand for HAL products like helicopters and avionics is only going to grow.
BHEL may have nearly doubled in stock price in this year, but the narrative is still quite strong. BHEL’s offerings for the energy storage solutions, electrical vehicles, defence, aerospace and infrastructure sector are likely to see big boost from the Union Budget 2023. BHEL would be a typical case of derived demand. Its order book is nearly 4.6 times its annual sales, which is likely to expand with more orders being farmed out. With power shortages in most parts, BHEL sees a revival in the thermal order pipeline too.
Overall Union Budget 2023 would be a story of infrastructure, defence and divestment. Agri stocks could also be beneficiaries, but we have to await clarity in the budget.