ETMarkets.com

NEW DELHI: With 12 days to go for the Union Budget, Dalal Street investors have begun building expectations.

The Budget will not only impact specific sectors, which will see a change in tax structures and sops, but also those that may be left out.

We list out sector-wise expectations that equity investors have from the Budget. Here we go:

Automobile: Uniform excise duty likely

One of the sectors impacted most by the cash ban, the automobile sector is looking for some big sops from Finance Minister Arun Jaitley in this Budget. Dalal Street is expecting uniform excise duty on passenger vehicles and an increase in tax sops.

The auto sector witnessed a recovery on a normal monsoon after two years of drought and implementation of Seventh Pay Commission and OROP awards. But the demonetisation drive launched on November 8 hit the sector, with pressure clearly visible on the number of entry-level vehicles sold.

This financial year, excise duty ranged between 6 per cent and 30 per cent. The industry is expecting a uniform excise duty structure, which if it materialise will be a positive for Maruti Suzuki, M&M and Tata Motors, among others.

“We believe the Union Budget will be a positive for the industry and expect Maruti to emerge as a beneficiary considering its large market share and pan-India presence,” Angel Broking said in a note.

There may be a scheme to incentivise those with plans to phase out older commercial vehicles (CV). That may be a positive for Ashok Leyland and Tata Motors.

Banking: Investors await some sops

The past one year has been very difficult for the banking sector, which not only reported alarming non-performing assets due to RBI push for clean balance sheets.

The sector also witnessed a slowdown in credit growth, even as RBI slashed policy rate by a cumulative 175 basis points since January, 2015. With the demonetisation drive hitting domestic lenders hard in December quarter, all eyes are on possible government sops.

There are expectations that the government would increase the quantum of recapitalisation for PSU banks. But brokerages such as Edelweiss Securities believe the government may continue to maintain the original rate of capital infusion and might not significantly change the earlier road map.

Dalal Street is expecting a road map for disinvestment in PSU banks. It is looking forward to any announcement from the Bank Board Bureau, which has not seen any action following its formation in April last year.

A roadmap for listing of state-owned general insurance companies (GICs) and boost to the affordable housing segment is also expected.

The government may “provide some details on the timelines for stake sale in the general insurance companies, which will promote higher transparency and accountability and will help discover value in the general insurance space,” Edelweiss Securities said.

There may also be announcements such as increase in tax exemption on home loans to boost demand for low-cost housing. At present, the limit is Rs 2 lakh, which is insignificant for metropolitan home buyers, experts said.

Capital goods/road & highways/defence: Big allocations expected

This would be the first time in India’s history when the Railway Budget is going to be merged with the Union Budget.

The Railways is looking at close to Rs 1.35 lakh crore of financial outlay for FY2018 and plans to tap extra budgetary resources to stick to the FY2018 outlay. Experts see around 15 per cent jump in allocation towards railways, which should be positive for rail-linked stocks such as Titagarh Wagons, L&T, BEML and Siemens, among others.

For FY17, the allocation has been raised by 52.8 per cent to Rs 1,00,011 crore. A major chunk of the incremental budgetary spend has been kept aside for the Dedicated Freight Corridor Corp. (DFCC), doubling of lines, construction of new lines and rolling stock.

In addition, the roads and highways sector is expected to see a 15-20 per cent rise in allocations over the FY17 outlay of Rs 55,000 crore. This may include construction equipment players such as Greaves Cotton, Timken India and Voltas.

A likely 20 per cent increase in allocation towards the rural electrification scheme could be a positive for players like KEC International, Jyoti Structure and Kalpataru Power, Angel Broking said in a note.

A 20 per cent rise in allocation towards metros over Rs 10,000 crore allotted in FY17 may generate action on the counters o fBEML and Titagarg Wagons, while analysts on Dalal Street expect about Rs 4,000 crore higher allocation (over FY17’s Rs 3,160 crore) towards water resources, river development and Ganga rejuvenation, which may spur stocks like Va Tech Wabag and Thermax.

“The challenge for the defence ministry is not budget allocation, but execution. The standing committee’s examination of past defence budgets revealed that the government’s ability to spend has come under repeated pressure. The ministry of defence has surrendered about Rs 35,000 crore from its capital allocations in previous four years. Nevertheless, due to cross-border tensions, it is more likely that defence will receive higher allocation,” Angel Broking said.

For defence, a 15-20 per cent jump in allocation is what some analysts are anticipating. But other brokerages have doubts over the room the government has to do so.

Cement: Waiting for fringe benefits

With the housing market melting following the cash ban, new housing projects and their demand have taken a hit. The sector is staring at a negative growth of 3-4 per cent for this financial year after putting up a good show in the initial part of the year.

To support housing-related sectors, the government last month announced interest subvention of 4 per cent on loans up to Rs 9 lakh and 3 per cent on loans up to Rs 12 lakh. But will the government announce measures more measures?

Higher allocation to affordable housing and infrastructure at large, promotion of Smart City, AMRUT and Housing for All schemes, and a cut in excise duty to a reasonable 6-7 per cent is what Dalal Street is looking out for.

At present, cement attracts higher excise duty at 12.5 per cent against around 6 per cent attracted by other core industries. Smart City, AMRUT schemes are expected to see 20 per cent higher allocation. A hike in exemption limit for interest on home loans could come handy.

Consumer sectors: Demand booster to help

For FMCG and other consumer sectors, a lift to consumer sentiment is the need of the hour. Especially FMCG is a sector that is reeling under pressure – marked by low volume growth – in the past couple of years. Two years of drought hurt rural demand, which improved in a bit in 2016 initially, before the demonetisation impact kicked in.

“We expect increased thrust by the government on schemes promoting rural growth; emphasis likely to be on MNREGA. Given huge illegal market share, logically excise duty on cigarette should be hiked by a modest at 8-10 per cent. We expect excise duty exemption on some food items such as ice-cream, cheese and packaged juices to be lifted as a step moving towards GST,” said Edelweiss Securities’ note.

At present select food items enjoy 0-6 per cent excise duty and any such hike should hit FMCG companies such as Dabur India, ITC, Hindustan Unilever, Parag Dairy and Britannia.

Metals: Protectionist measures awaited

The is one sector that needs government’s attention, given volatility in metal prices globally and cheap imports. There are hopes that the government may extend offering protection to aluminium sector from cheap imports from Mideast and the People’s Republic of China, with minimum import price, removing the anti-dumping duty on caustic soda import and change in classification to lower freight cost. Several steps have already been taken for the steel industry. Some more announcements on the same is likely. Here’s a table showing expectations from the metal sector. (See table)

Oil & gas: Not much expected

What will happen to oil & gas sector after the OPEC nations start cutting crude production this year?

There may not be much announcement on this sector, which many reforms already taken up by the government in the past few years.

Experts do not see any revision to prevailing 20 per cent ad- valorem oil cess, which may be neutral for upstream players such as Cairn India, Oil India and ONGC.

It is expected that the customs Duty for new refineries or refinery expansions, and other Imports, will be brought down to zero from 22.85 per cent at present. LNG imports, which attract 5 per cent customs duty of 5 per cent may be brought down zero zero.

“The government would also consider changing the various income tax norms pertaining to tax holiday for companies and provide incentives for the shift towards cleaner fuel for downstream companies,” Edelweiss note said.

Power: Extension of sunset clause likely

Experts noted that many states with high debts have joined the UDAY scheme. “Reduction in AT&C losses is an important objective of UDAY and we expect the government to increase budgetary allocations towards the same,” Angel Broking note said.

The government had in FY17 Budget hiked the clean energy cess on coal to Rs 400 per tome from Rs 200 per tonne. There could be partially withdrawn. There could be an extension of the sunset tax clause for power companies till March 2020.

Pharma: Awaits MAT revision

The pharma sector may see revision in Minimum Alternate Tax (MAT) which is levied on SEZs. The government may remove excise duty disparity between active pharma ingredients API and formulations.

Rolling out of universal access programme to essential medicines and medical services, expansion of scope of New Healthcare Protection Scheme to increase health insurance coverage and an increase exemption limit under Section 80D for health insurance is what the Street is anticipating for the sector.

Others:

Here’s a look at some other sectors, which are likely to be impacted more or less by Budget announcements: