SBI to HDFC Bank, Escorts, Bajaj Finance, Kotak Bank, Cipla to SBI Life - The “Make or Break” Union Budget - Expectations 2021-22
GEPL capital highlights that the sentiment surrounding the Union Budget 2020-21 is that the government would announce a series of measures that would help in the revival of the domestic economy. Budget would primarily be directed towards raising investment and consumption levels which involves substantial employment generation. This could largely be through the infrastructure development route entailing higher capex.
GEPL capital highlights that the sentiment surrounding the Union Budget 2020-21 is that the government would announce a series of measures that would help in the revival of the domestic economy. Budget would primarily be directed towards raising investment and consumption levels which involves substantial employment generation. This could largely be through the infrastructure development route entailing higher capex. Higher allocations towards capital (infrastructure) spending and the resultant employment opportunities generated would in turn lead to higher consumption. Here are some thoughts on SBI to HDFC Bank, Escorts, Cipla to SBI Life stocks.
Banking and Financial Sector:
According to the Reserve Bank of India (RBI), gross non-performing assets (NPAs) could balloon to 14.8% by September under the worst case scenario. India’s upcoming budget may set out a framework for setting up a bad bank to handle the expected influx of bad loans post pandemic. A bad bank would allow regular banks to sell their bad loans and focus on bringing in new business. Non-banking finance companies expect the government to provide continued liquidity support by encouraging banks to lend more to the sector. Any funds set up to fund the lower rated NBFCs undergoing liquidity stress will be positive.
Frontliner Stocks: SBI, HDFC Bank, Bajaj Finance, Kotak Bank
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Government could raise budgetary spending on rural, which would be positive for Tractors and 2Ws. Also, to get outdated and polluting old vehicles (trucks and buses) off the road, GEPL expects the government to roll out an incentive-based scrappage policy to be implemented soon. Additionally we expect the Budget to provide incentives for local manufacturing of EV batteries. Focus will also be on the fine print of the Production Linked Incentive scheme to boost local manufacturing. Any reduction in GST rates for vehicles would be a positive surprise but the same remains unlikely.
Frontliner Stocks: M&M, Maruti Suzuki, Escorts & Amara Raja for the batteries
Healthcare and Insurance Sector:
The government of India has already introduced a production-linked incentive scheme to promote local manufacturing of critical Key Starting Materials (KSMs), Drug Intermediaries (DIs), Active Pharmaceutical Ingredients (APIs), and the scheme on promotion of bulk drug parks. Promoting health insurance for individuals by enhancing the quantum of deduction towards medical insurance premium payment under section 80D of the ITA. The public spending on health expenditure, the total expenditure by the centre and the states for FY 20 was 1.29% of GDP, which is far below many EM’s and needs to be looked at carefully post the pandemic.
Frontliner Stocks: IPCA Labs, Divis Labs, Apollo Hospitals, Cipla, Cadilla & SBI Life, HDFC Life for Insurance
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