After a $68 billion price drop in Adani Group shares that helped make India’s stock market the worst performer in Asia this year, investors are looking to government spending to fuel an uptick.
Prime Minister Narendra Modi’s government will present its annual budget to parliament on Wednesday. The plan is expected to boost infrastructure, defense and logistics funds, bringing windfalls to related businesses.
“Chances are that the budget will revise sentiment for stocks in India,” said Arun Kejriwal, founder of KRIS, a Mumbai-based investment consultancy. Tax collections have held up while capital spending is at the top of the government’s agenda, allowing “additional resources for different sectors”.
After outperforming its global peers over the past two years, Indian stocks have fallen on interest rate hikes, reduced consumption and shifting investor preferences as China reopens. Recently, sentiment has suffered from a short-seller campaign against Gautam Adani’s business empire.
Here are some of the key areas investors will focus on in Modi’s latest budget:
Infrastructure
Infrastructure spending, especially on roads and railroads, is likely to be increased by about 15%, analysts at Jefferies Financial Group Inc. wrote. led by Mahesh Nandurkar in a note. Cement companies should be among the beneficiaries.
Focused stocks are: Ultratech Cement Ltd., Rail Vikas Nigam Ltd., IRB Infrastructure Developers Ltd.
Defense
Analysts expect the government to increase the budget for local production in the defense sector as the country looks to reduce its dependence on imports. India has also increased its arms exports in recent years.
Stocks in focus are: Hindustan Aeronautics Ltd., Bharat Dynamics Ltd., Mazagon Dock Shipbuilders Ltd.
Logistics
The government sees increasing allocations for logistics parks, dedicated freight corridors and cold storage as part of plans to make India a global economic powerhouse.
Stocks in focus are: Container Corp of India Ltd., Allcargo Logistics Ltd., Delhivery Ltd.
production
The government has spent money to encourage companies to produce more in India, including through so-called production-related incentives. According to analysts from Mumbai-based brokerage Sharekhan Ltd.
Focused stocks are: Reliance Industries Ltd., Suzlon Ltd., Dr Reddy’s Laboratories Ltd., SRF Ltd., Trident Ltd.
Others
Other possible measures in the budget include stimulating consumption and facilitating investment. The latter may entail changes in taxes on long-term capital gains of different asset classes.
(Except for the headline, this story has not been edited by DailyExpertNews staff and is being published from a syndicated feed.)
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