Seven key sectors that will be in spotlight post Budget 2025

With Finance Minister Nirmala Sitharaman unveiling a consumption-focused budget, it was not surprising to see consumption segment stocks registering a smart rally on Saturday even as investment-oriented stocks took a hit.

To be sure, the finance minister did announce schemes and significant allocations for other sectors as well, including agriculture, EVs, manufacturing, shipbuilding, power, infrastructure, and insurance.

Here are some of the key sectors that are expected to be in the limelight going ahead on account of the Budget announcements.ShippingFisdom’s Nirav Karkera believes that the announcements in shipping sector would support the industry in its ability to use the buffer cash flows to deploy more resources into faster execution and better quality execution increases. “It has a good multiplier effect on the entire manufacturing chain,” he adds.

For shipbuilding, the finance minister has announced an exemption of basic customs duty (BCD) on raw materials, components, consumables or parts for the manufacture of ships and ship breaking for another ten years. This decision, she suggested, has been made keeping in mind the long gestation period of the sector. The finance minister also announced a maritime development fund with corpus of Rs 25,000 crore. Further, the government will give the shipbuilding industry a thrust by way of shipbuilding clusters.

Stocks- Cochin Shipyard, Mazgon Docks, Shipping Corporation. Great Eastern Shipping

Insurance

With the new tax regime becoming more attractive, people shifting from the old tax regime will no longer be able to claim benefits under Section 80C, said Alok Agarwal, Head of Quant and Fund Manager at Alchemy Capital Management.

"Earlier, many people bought insurance policies to save on income tax under the old regime," Agarwal said. He added that under the new tax regime, such deductions are not available and hence the demand for life insurance policies could be negatively impacted. While people don’t buy life insurance only for tax benefits, this change could still have an incrementally negative impact on the life insurance sector.

Also, the Budget mentioned increasing the FDI limit for the insurance sector from 74 percent to 100 percent. This Agarwal says will have not much impact on the listed Indian companies are they already have a norm of minimum 25 percent promoter shareholding, and so a 100 percent FDI doesn’t change things for them. But it could lead to new foreign insurance companies coming to India which can increase the competition, he said.Power

The power sector continued to be a focus area in the Budget as the finance minister allocated Rs 48,396 crore towards the power sector, including new and renewable energy, a 30 percent increase over the previous year’s allocation of Rs 37,143 crore (revised estimate) and 22 percent over the budget estimate of Rs 39,602 crore.

The finance minister also announced a plan to incentivise electricity distribution reforms and augmentation of intra-state transmission capacity by states. This, she noted will improve financial health and capacity of electricity companies. Another major announcement was made on the Nuclear Energy Mission for Viksit Bharat. The FM announced a 100GW target by 2047 as well as setting up of the Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs 20,000 crore.

Samir Bahl, CEO, Anand Rathi Advisors is of the view that the finance minister has continued to emphasise domestic manufacturing of solar PV cells, EV batteries, grid-scale batteries, energy storage, and others. As a result, stocks within these segment and related to them will continue to do well in the medium term, “Further, additional borrowing initiatives for states (0.5 percent of their GSDP) should provide a fillip to regional power transmission and distribution companies,” he added. Most analysts continue to remain positive on the sector, especially post the recent corrections.

Stocks: L&T, CG Power, NTPC Green Energy, SkipperAffordable housing

The announcements in affordable housing segment to some extent will benefit the real-estate ancillaries rather than direct real estate players, said Siddarth Bhamre, Head - Institutional Research at Asit C Mehta. He added that lot of the activity in the affordable housing space happens via government and the private real estate player may not necessarily benefit from it. A beneficiary of the affordable housing theme will be ancillaries like paints, switch board companies, cement, consumer durable companies, Bhamre added.The budget added another 40,000 units, which will be completed in 2025, further helping middle-class families who were paying EMIs on loans taken for apartments. Under the Special Window for Affordable and Mid-Income Housing (SWAMIH) fifty thousand dwelling units in stressed housing projects have been completed, and keys handed over to home buyers.

Stocks - Ultratech Cement, Polycab, Asian PaintsInfrastructure

For the sector, the finance minister announced the creation of an ‘Urban Challenge Fund’ to transform cities into growth hubs, support innovative redevelopment, and improve water and sanitation infrastructure. She further said that each infrastructure ministry will present a three-year list of Public-Private Partnership (PPP) projects, with a focus on three PPP proposals per ministry. (An initial Rs 10,000 crore has been proposed for the fiscal year 2025-26). The budget also includes Rs 1.5 lakh crore in interest-free loans for capital expenditure.

Market experts expressed some disappointment on the modest increase in capex outlay from Rs 11.11 lakh crore in last fiscal to Rs 11.2 lakh crore. Apurva Sheth Head of Market Perspective and Research, SAMCO Securities notes that the governments focus until now was on infrastructure and capex seems to be taking a hit due to political compulsions and freebie politics. As a result, capex heavy sectors like railways, defence, infrastructure and engineering are likely to take a hit in the near-term, he says.

Stocks: L&T, RVNL, KEC InternationalAgriculture

The focus of the budget has been clear to revive consumption and increase the farmer income, so the consumers can have some more money at their disposal, said Agarwal. A consumption push will benefit companies in the FMCG, auto, and food ordering space, Agarwal added.

The finance minister in her budget announced a Prime Minister Dhan-Dhaanya Krishi Yojana, which will cover 100 districts with low productivity, moderate crop intensity and below-average credit parameters. The scheme will increase agricultural productivity by adopting crop diversification, augmenting post-harvest storage at the panchayat and block level, and improving irrigation facilities. It will also avail long-term and short-term credit to help 1.7 crore farmers.Also, the around Rs 1.5 lakh crore capital expenditure by the government is expected to generate around Rs 3-4 lakh crore multiplier boost to the economy, said A Balasubramanian, Managing Director and CEO, Aditya Birla Sun Life AMC. He added that expected interest rate cuts will lower capital costs and fuel economic expansion and employment.

Stocks - Dabur India, HUL, Bajaj AutoTravel and Tourism

Saurabh Mukherjea, founder and chief investment officer at Marcellus Investment Managers said that the number of foreign travellers in India remains lower than in 2019. However, the government's e-visa announcement could help attract more international tourists. Currently, hotel operators and luggage manufacturers are experiencing approximately 25 percent revenue growth, and the finance minister’s initiatives are expected to further boost these sectors.

The finance minister also announced a number of measures to improve tourism like MUDRA loans for homestays, streamlined e-visa facilities along with visa-fee waivers for certain tourist groups, land for building key infrastructure to be provided by states, among others.Stocks - VIP Industries, Lemon Tree, ITC Hotels.