Stock market investors in India are bracing themselves for the challenging weeks before the upcoming budget session as economic growth retreated from a peak and foreign investors pressed the sell button on Indian shares.
India’s stock market outperformed most Asian markets, however, it is already overshadowed in 2023 as China’s reopening economy will attract funds to the North-Asian market after a record sell-off.
Historical data shows that India’s shares are likely to see muted trading ahead of the federal budget. According to data compiled by Bloomberg Intelligence, there has been an average drop of 1% since 2003 in the month before the budget.
According to Nitin Chanduka, Bloomberg Intelligence Analyst, Chinese stocks are trading at a much cheaper valuation as compared to their South Asian peers, prompting global funds to opt for a tactical rotation.
“India trades at a forward PE of 20 times, almost double that of Chinese equities. The choice is clear,” said Chanduka.
As far as the Union Budget for FY24 is concerned, expectations are building up regarding its emphasis on fostering domestic growth amid the global slowdown. Stocks in the automobile, banking, construction, consumer staples, defence, infrastructure, renewable energy, railway, sugar, and textile sectors are likely to find favour among investors, according to experts.
“Rather than a big bang one, I think this will be a mild, no-nonsense sort of a Budget. It will focus on fiscal prudence, but the government will look at elements of expenditure which can have a multiplier effect on the economy,” said Anshul Saigal, Head of PMS at Kotak Asset Management Co.
“India is in a mid-cycle of growth wherein all economic activities are showing robustness. Therefore, more impetus will be given to pro-cyclical sectors such as construction, infrastructure, and banking,” said Azeem Ahmad, head PMS and principal officer at LIC Mutual Fund.
Insurance stocks
The Finance Ministry had proposed a slew of amendments to the insurance laws. These include granting insurers a composite licence which allows them to sell different financial products and increasing the retirement age of the chairman and whole-time members of the Insurance Regulatory and Development Authority of India (IRDAI).
The Insurance Laws (Amendment) Bill, with proposed amendments to the Insurance Act 1938 and Insurance Regulatory and Development Authority Act, 1999, is expected to be tabled in Parliament in the upcoming Budget session starting next month, according to reports.
Experts say that if the composite insurance registration is passed, there would be a change in solvency margin and capital requirement for these companies. It could lead to the entry of new players in the industry. However, insurance behemoth LIC could enter the general insurance segment through acquisitions and cross-sell general insurance to its existing client base.
ITC
Brokerage firm Prabhudas Lillader is expecting a 5-10% hike in cigarette excise duty. The last hike happened three years ago and if it happens in the upcoming budget, ITC’s shares are expected to suffer a setback
Agricultural Stocks
Observers expect that agriculture is likely to be a priority in the Union Budget.
“With the Indian fiscal account weighing down, the fertiliser subsidy is likely to remain flat or see a cut,” said Urvi Shah, Research Analyst at SAMCO Securities
“Stocks of fertiliser and other agrochemical companies having exposure to nitrogen and urea will be among the key beneficiaries. The allocation and subsidy will aid in a higher crop yield,” she added.
Written by Simran Bafna
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
