The government is set to present its budget on July 23, marking the first major policy announcement of Prime Minister Narendra Modi’s third term. This budget is anticipated to reflect new economic priorities and strategies following the unexpected election results that saw the BJP retain power with the support of its allies. To stimulate consumption, the government may consider reducing personal taxes or increasing spending on consumer-oriented sectors.
Key Sectors and Potential Impacts
Consumer Goods and Rural Schemes
Increased allocation for rural development schemes is expected, which could boost consumption. Beneficiaries may include consumer goods companies like Hindustan Unilever and two-wheeler manufacturers such as TVS Motor and Hero MotoCorp. A minimal increase in tobacco taxes could be favorable for ITC, the leading cigarette manufacturer.
Real Estate
The budget is likely to increase funding for affordable housing, benefiting developers like Macrotech Developers and Sunteck Realty. Additionally, an interest subsidy scheme for urban housing might aid financiers like Aavas Financiers and Home First Finance.
Automotive Industry
The government is anticipated to maintain subsidies for electric vehicles (EVs), benefiting companies like Tata Motors, Ola Electric, Olectra Greentech, and JBM Auto. Conversely, if EV subsidies are less than expected, it could advantage Maruti Suzuki, which focuses on hybrid vehicles.
Manufacturing Sector
The continuation of production-linked incentive schemes is expected to support local manufacturing and job creation. Companies in technology hardware, telecom equipment, electronics, and medical devices, such as Dixon Technologies, Ideaforge Technology, and Biocon, could benefit. Capital goods firms like Larsen & Toubro and infrastructure companies might also gain from increased capital expenditure.
Trading and Capital Gains Tax
Any changes to capital gains tax could negatively impact equities, potentially increasing the tax burden on equity and mutual fund investors and reducing trading volumes. This could affect brokerages like Motilal Oswal, ICICI Securities, Angel One, and 5 Paisa. Additionally, government and regulatory efforts to curb derivatives trading may impact market performance and trading volumes, further affecting brokerages and trading platforms.
As the budget unfolds, these potential changes will reveal the government’s approach to driving economic growth and addressing key sectoral challenges.
Also read: Budget 2024 Live Updates: Nirmala Sitharaman Set to Present Budget with Focus on Job Creation and Tax Rate Cuts
