Union Budget 2023: Sector To Look Out For

Sector Watch for Union Budget 2023-24

Union Budget 2023-24 is likely to have an impact on various sectors, depending on the announcements. Here we look at which sector is best to invest ahead of budget and the best sectors to invest in long term. Obviously, the best sector to invest would be a mix of sectors pertaining to infrastructure, housing, financial services etc. The budget effect on share markets would be visible in the days following the Union Budget. That will determine the sectors to invest in 2023. Among other sectors, we also look at the best FMCG stock for long term as an outcome of the budget.

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DEFENCE SECTOR COULD GET AN ORDER BOOST

Indian defence companies like HAL, Bharat Dynamics, Mazagon Docks etc have been on a rally in the last few months and most of them are more than multi-baggers. Union Budget 2023 is likely to focus on farming out more orders to domestic players. With rising geopolitical uncertainty and also the rise in skirmishes at the border, India is likely to increase its defence outlay. One can logically expect the defence stocks to be the big beneficiaries of this budget announcement.

Housing sector could see an added tax boost

The government has not been too happy with the tepid growth in mass housing in India. The deals happening in most of the cities is more of upmarket deals and not the kind of mass home ownership that the government would like to achieve. One major announcement expected in the budget is the expansion of the Section 24 limit for home loan interest from Rs2 lakhs to a higher limit of Rs4 to Rs5 lakhs. This is not only an adjustment for inflation but also more in sync with home prices. In addition, the government may also simplify it further by combining various tax breaks into a single outer limit. If the government really wants the affordable housing scheme to be successful, the price limit has to go well above Rs45 lakhs, which is impractical in cities like Mumbai, NCR and Bengaluru.

Financial companies to benefit in multiple ways from the budget

Non-banking finance companies (NBFCs) have often complained that co-lending norms of NBFCs and banks is tilted in favour of the larger NBFCs. Hence, the government may allow consortium lending even in case of co-lending so that smaller NBFCs can also participate. The digital lending activity in India had picked up but is facing a lot of flat for loan recovery practices, Chinese linkages etc. Budget 2023 can look at streamlining the license approval and other processes to give a level playing field to all NBFCs.

Automobile sector looks for an EV boost

Automobiles could be an indirect beneficiary of this budget, especially after the chip related problems in the last few years. Firstly, the government can streamline the GST charges on cars as a regular product rather than as a non-merit product. Secondly, the government can give a push to the EV business with a clearly articulated batter swap policy that can reduce the upfront cost of ownership. The CV industry will also benefit from the aggressive capex plans of the government in the budget.

FMCG may be the joker in the pack

How can FMCG benefit from the Union Budget 2023? It can offer a more stable taxation policy on cigarettes, which can substantially benefit companies like ITC. Also, the FMCG sector is largely dependent on rural demand and hence any thrust to rural incomes, farm related growth etc can be a great value addition to the FMCG sector. A revival in rural demand can be a major positive for FMCG and other customer facing stocks.