Budget 2024: Which Stocks and Sectors Will Benefit?

 The finance minister presented the interim budget yesterday. As expected there were no big announcements. No taxes were changed.

But there were some important ones. Certain decisions taken by the government will impact specific stocks and sectors.

While this budget will not change the fortunes of the stock market as a whole in one direction or another, there could be some big moves in certain pockets of the market.

Let's examine these...

The Big Takeaway for Investors

Perhaps the biggest taking point of the budget was the fiscal deficit.

Not only was it contained to 5.8% of the current year's (FY24) GDP, but next year's target too has been projected at 5.1%.

This is a big reduction year on year. It would put the Indian government well on track to meet its fiscal responsibility goals.

If this is achieved in the coming year, the government would have succeeded in putting a lid on the amount it borrows from the bond market. This, in turn, will provide sufficient space for the private sector to borrow, without being crowded out by the government.

This decision is positive for the bond market and a sign that lower interest rates could be on the way later this year.

This is why the banking indices on the stock exchanges closed higher by about 0.5% today. Banking stocks have welcomed this development.

Lower interest rates are also positive for auto stocks, real estate stocks and other interest rate sensitive sectors.

Infrastructure Push Continues

Last year, the big talking point was the government's massive infrastructure push. The Rs 10 trillion allocation was indeed a huge amount.

This time, the market wasn't expecting a major increase in allocation. Still, the announcement of an 11.1% increase was significant. The government has signalled that even in an interim budget, it's willing to remain committed to its infra push.

This is positive to all kinds of infra sectors and stocks. Railway stocks, cement stocks, and many other infrastructure stocks are expected to benefit.

Railway stocks especially will be in focus going forward as the government has announced 40,000 coaches will be upgraded to Vande Bharat levels and announced three new logistics corridors.

The government's housing for all initiative also received a boost in this budget. Overall, the real estate sector would be pleased. The momentum in this sector should continue.

Renewable Energy

The solar and wind energy sectors got a shot in the arm in this budget.

The government has announced that the roofs of one crore households will be solarized to achieve a capacity of 20-25 GW.

A concrete announcement on this front has been a demand from the industry because the government's earlier initiatives had fallen short.

Solar energy stocks had a mostly positive reaction to the budget. Also read - Why 2024 is a Good Time to Invest in the Best Indian Solar Stocks.

The announcement of viability gap funding for offshore wind farms was a welcome step. Just projects are challenging in terms of engineering and financial aspects. The private sector might fall short if they attempt such massive offshore projects.

While the initial target is modest at 1 GW, once the industry achieves confidence, offshore wind farms can be scaled up significantly.

Defence

As expected the government did not lose focus on defence allocation.

The defence budget reached a record allocation of Rs 6.21 trillion for FY25, an increase of 4.7% from FY24. This amount is about 13% of the total budget.

The crucial number watched by the market, the amount for capital acquisitions, was 1.72 trillion or about 27.7% of the total defence budget.

But undoubtedly the biggest news for the defence industry was the Rs 1 trillion allocated to deep tech as very long-term low/zero interest loans.

This is aimed at incentivising industry to step up their R&D investments and develop cutting-edge technologies for the Indian armed forces.

Many defence stocks especially those in high-tech segments like sensors, radars, missiles, drones, etc will benefit from this in the long term.

Conclusion

All in all, this was a short, contained budget. Keeping in mind the upcoming elections, there was a lack of 'big bang' announcements. We had written about this in our editorial about what to expect from the budget.

Despite the low expectations, the government has done a good job in addressing concerns about many industries and also not going overboard in its commitments.

The fiscal management will be the standout achievement of the government if the FY25 deficit target is met. This will help in lowering interest rates in time which will provide a boost to GDP growth.

It will also help to keep the rupee largely stable in the forex markets. This will provide the benefit of keeping the prices of imported goods, especially crude oil, in check. This will have a positive overall effect on reducing inflation.

High GDP growth with low/moderate inflation and low/moderate interest rates sounds like a very positive combination for the stock market in the long term.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.