Thematic Report. Budget Expectations

Transcription

1 Thematic Report Budget Expectations rd February 2015

2 Budget Expectations The annual budget will be presented on 28 th February, 2015 and there is an air of expectation which has built up around it. This is Modi government s first full budget and hence a lot of emphasis is going to be placed on the government s flagship promises since 2014 (Swachh Bharat, Jan Dhan Yojna, Make In India, etc). Given that crude has fallen by nearly 50% from its recent peak, it has created a headroom of nearly Rs 500 bn of budgetary spend. With resource monetization (coal and spectrum) likely to far exceed expectations and with schemes like DBT resulting in additional savings, the government is likely to use these funds to push through capex into infrastructure investments, to give a further push to the economy. Although the government is likely to pursue spending to push economic growth, it is unlikely to spend lavishly, as it would want to stick to its Fiscal Deficit targets. 2

3 Budget Expectations HOUSING FOR ALL The government plans to provide homes to all by 2022 which is a very ambitious target. Affordable housing and availability of funds at cheaper rates are key to address the issue. The government is also expected to provide more clarity on tax treatment of REIT s. Cheaper Credit For Affordable Housing 40 bn 60 bn Interest sub-vention for LIG Housing* 1% 1% Deduction On Housing Loans (Interest + Capital Repayment) 200, ,000 * LIG- Low income group (Loans upto 25L for houses valued upto 40L) Ashiana Housing, DHFL, Mahindra Lifespace, Gruh Finance, Repco Home, Chola Fin, Kajaria, Cera, Orient cement SWACHH BHARAT ABHIYAAN (SBA) One of PM's pet project, the SBA aims to accomplish the vision of clean India by 2019, and aims to spend more than 3000 bn on various areas of hygiene, sanitation & waste management. Increased allocation to "toilets for all" bn 400 bn Increased allocation to river cleaning 20.4 bn 30 bn Increased allocation to waste management NA NA Sintex, VA Tech Wabag, Praj Inds SMART CITIES Smart cities, a vision launched by the Union Government, envisages building 100 cities using a sustainable framework ensuring employment and improved quality of life to all by Overall Allocation 70.6 bn 100 bn Infrastructure Status (Smart Cities & Integrated Townships) No Likely Siemens, Sterlite Tech, Schneider Electrics, L&T 3

4 Budget Expectations RENEWABLE/NON-CONVENTIONAL ENERGY FOCUS With the government having stated (time and again) its commitment to developing clean/renewable energy, this sector is likely to increased allocation and tax sops. Overall Allocation 10 bn 20 bn Accelerated Depreciation Benefits Yes Yes Suzlon, Tata Power, NTPC, BHEL EFFICIENT SPENDING & FINANCIAL INCLUSION The government has emphasized on plugging leakages in the subsidy mechanisms, and also to bring as many as possible within "financial inclusion". A record 13.2 crore new bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana in last six months with ~Rs 110 bn coming in as deposits. JAN DHAN YOJNA (Accounts Opened) 0.1 bn 0.2 bn+ AADHAR (Cards Issued) 0.8 bn 1.1 bn+ DBT (Households under the scheme) 0.1 bn NA PSU Banks and private banks including HDFC Bank, Yes Bank AGRICULTURE REFORMS Government is likely to drive investments in Warehousing segment through various fiscal incentives to private sector. Incentives can be in the form of subsidy for setting up a warehouse and tax benefits on certain minimum amount of capex. Indirect way to promote warehousing will be through implementation of GST, which will drive investments near the point of consumption pan-india. Govt is likely to increase fundings for various rural focused flagships schemes. Cold Storage 1.6 bn NA Ware Housing 3.4 bn NA Flagship schemes - PMGSY, NREGA, Irrigation projects etc. Snowman Logistics, Gati M&M, Rallis India 4

5 Budget Expectations RAILWAYS AS ENGINE OF ECONOMIC GROWTH Railways is an important part of any economy, more so, an economy as large and diverse as India. But, the sector has seen little progress over the past years. The new political dispensation has stressed that it wants to make the railways as the engine of India's next growth phase, and hence big announcements with this regards can be anticipated in the upcoming budget Track Renewals 385 bn 20% - 25% Higher Rail/Road Under/Over Bridges, etc 35 bn 20% - 25% Higher Connectivity To Ports 40 bn 20% - 25% Higher Northeast Rail Infrastructure 51.2 bn 20% - 25% Higher Container Corp, Texmaco Rail INCREASE IN DISPOSABLE INCOME Government is likely to hike tax exemption limit. There is possibility of increase in investment limits under various sections, so as to boost tax savings for middle class. Will boost consumption. Tax exemption limit 0.25 mn 0.30 mn Investment limit under 80C 0.15 mn 0.20 mn Investment limit for Mediclaim 30, Maruti, Eicher Motors (also play on CV recovery), Hero Moto, Dabur, HUL 5

6 Top Picks Cholamandalam FIN CMP: 581 DHFL CMP: 496 Eicher Motors CMP: L&T CMP: 1687 M&M Mahindra Life Maruti Orient Cement CMP: 1261 CMP: 513 CMP: 3546 CMP: 174 Rallis India CMP: 240 Yes Bank CMP: 811 6

7 Research Team Vivek Mahajan Hemant Thukral Head of Research Head Derivatives Desk Fundamental Team Sunny Agrawal FMCG/Cement/Mid Caps Shreyans Mehta Construction/Real Estate Jaymin Trivedi Banking & Finance Naveen Baid Oil & Gas/IT Pradeep Parkar Database Analyst Quantitative Team Sudeep Shah Sr.Technical Analyst Rahil Vora Technical Analyst Soni Patnaik Derivative Analyst Advisory Support Avinash Nahata Advisory Desk Suresh Gardas Advisory Desk Salim Hajiani Advisory Desk Mohan Jaiswal Executive Research Support ABML research is also accessible in Bloomberg at ABMR 7

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