Budget 2024: These sectors are potential winners and losers of Modi’s Budget 3.0

Budget 2024: Finance Minister Nirmala Sitharaman is all set to present India’s budget for fiscal year 2025 on July 23, which will be the first of Modi’s Budget 3.0. After the unexpected election result that brought Modi’s party back to power with the support of a coalition, huge expectations hang over the future of Asia’s third-largest economy, whether personal taxes are cut or the Modi government increases spending on consumer-facing sectors.

Industries such as consumer goods, real estate, housing finance, infrastructure and autos, according to brokerage firms, could benefit from a boost in consumption. However, some sectors could face challenges.

Here are the likely winners and losers in the upcoming budget.

SECTORS RELATED TO RURAL AREAS
Citing Citi, Reuters said in a report that the government is likely to allocate more funds for rural programs to boost consumption, which will benefit companies such as Hindustan Unilever, TVS Motor and Hero MotoCorp. According to Jefferies, reported by Reuters, a tobacco tax increase of less than 5-7 percent could prove beneficial for the country’s largest cigarette maker, ITC.

PRODUCTION
The expected continuation of production-linked incentive programmes aimed at stimulating local manufacturing and job creation is likely to benefit companies such as Dixon Technologies, Ideaforge Technology and Biocon, according to HSBC.

Also read: Union Budget: Govt should rationalise customs duties in budget to boost domestic manufacturing, says Indian Chamber of Commerce

In addition, capital goods companies such as Larsen & Toubro could also benefit from increased capital spending in the fast-approaching budget, Jefferies said.

PROPERTY
Citi added that given the likelihood of the government increasing funding for social housing, this could benefit developers such as Macrotech Developers and Sunteck Realty.

Meanwhile, Jefferies said an urban housing interest subsidy scheme could support companies such as Aavas Financiers and Home First Finance.

Also read: How Modi govt can transform India into a real estate powerhouse, brick by brick, under the Union Budget

CAR MANUFACTURERS
India has earmarked subsidies totalling Rs 11,500 crore over five years to encourage the adoption of electric vehicles (EVs). Analysts at Macquarie, cited by Reuters, predict the government will maintain both the amount and the duration of these subsidies in its latest scheme.

The policy stance is expected to favour key players in the electric vehicle sector, including Tata Motors, India’s leading electric car maker, as well as upcoming IPO entrant Ola Electric, known for making electric scooters, and electric bus makers Olectra Greentech and JBM Auto.

On the other hand, if subsidies for electric vehicles turn out to be lower than expected, it could potentially benefit Maruti Suzuki, India’s largest carmaker, which has focused on hybrid vehicles rather than fully electric models.

COMMERCIAL
Morgan Stanley has suggested that any changes to the capital gains tax, such as extending the holding period or raising the tax rate, could weaken stock markets, although it believes such changes are unlikely, Reuters reported.

If these changes are implemented, they will increase the tax burden on investors in stocks and mutual funds, which will weaken their tax benefits compared to other asset classes. Moreover, there is the potential for reduced trading activity, which could impact brokerages such as Motilal Oswal, ICICI Securities, Angel One and 5 Paisa, among others.

Meanwhile, the Mutual Fund Association of India has advocated for exempting mutual fund units from long-term capital gains tax.

Regulators and the government are also seeking to clamp down on derivatives trading, which has significantly boosted the stock market since the COVID-19 pandemic, citing its speculative nature.

Jefferies warns that such measures, including higher taxes, could restrict market activity and consequently affect the operations of brokers and trading platforms.

(Based on information from Reuters)

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