Buoyed by great expectations from the forthcoming budget, and a healthy inflow of investments from the FIIs the sensex gained as much as 6% in January 2015. Among the emerging markets, the sensex has thus outperformed its peers.
Given the general climate surrounding the budget, it would appear that the market in general is expecting a budget that would help it scale greater heights. Remember that we have the Prime Minister’s ‘Make in India’ agenda which is expected to give a great fillip to manufacturing activity in general. Yet, on a closer examination we can notice that certain sectors will receive more focused attention than the rest. The following are among the key sectors to watch out for in the run up to the budget.
Infrastructure is expected to come up a big winner from the forthcoming budget. Apart from the infrastructure companies, we need to keep a watch on cement companies since any big ticket infrastructure development cannot be achieved without substantial cement consumption. For the same reason, the steel sector is also likely to benefit thought to a lesser degree in comparison.
Read more - Steel demand in India will grow in single digit in 2015
India suffers a net energy deficiency of about 13% and much of it is in the southern states. Interestingly, when we look at the per capita power consumption in India, it pegs lower compared to several other developing countries. The power tariff in India is cheaper compared to many other countries. With consumption constantly on the rise and demand outstripping supplies, the power sector holds great potential for fresh investment in generation as well as distribution management. Distribution losses and pilferage account for as much as 5% of all power generated in the nation and is a good candidate for focused attention.
Additional Read- Sector Watch – Power
The Banking sector is expecting some bold reforms from the budget. Easing of the monetary policy and recapitalization for the PSU banks are the two major components likely to be addressed. A rate cut by the RBI in March/April which will be guided by the fiscal discipline that the government wants to follow will be provide further impetus to the PSU banks.
Developing smart cities across the nation is another pet project of the Government and a beginning has already been made in Andhra Pradesh where Singapore and Japan have evinced in collaborating with the state government to create a mega smart city for the newly formed Andhra Pradesh, Assuming that the 100 smart cities program gets under way significantly, it is likely to benefit housing finance sector since low cost housing is an integral part of the program. Alongside we can see some action in paint, domestic electrical manufacturers, ceramics and plywood industries as ancillaries to housing.
Railways and Defence
Railways are likely to witness focused attention both in terms of FDI as well as an overhauled approach to the entire rail network system in the country. Therefore, firms closely associated with the Railways in signals, tracks, and carriages are likely to benefit from the action.
Indigenisation and creation of export capabilities in the defense sector is another ambitious agenda of the NDA government. When this plan gets underway, it could also bring into focus many dark horses.
Pour in your thoughts in the comments section below!