The Indian stock markets closed in the red on Wednesday ahead of Union Budget presentation with BSE Sensex falling 0.19% to 35,965 while Nifty fell 0.20% to 11027.70. Major Nifty gainers were Infratel 352 (2.19%), Kotak Bank 1109 (1.93%), Tech Mahindra 611 (1.34%), Reliance 962 (1.22%) and Tata Motors 400 (1.05%). Major losers were Dr Reddy 2,224 (-3.56%), Tata Steel 706 (-3.36%), UPL 751.40 (-2.51%), Hindustan Unilever 1365 (-2.50%) and Cipla 591.80 (-2.34%).
Among the major Sensex gainers were Kotakbank 1109.75 (1.85%), HDFC 1955.70(1.16%), Indus Ind Bank 1754.15 (1.00%), Tata Motors 399.25 (0.77%), HDFC Bank 2006.35 (0.38%).
With expectations of a rural, agri-focussed budget from Finance Minister Arun Jaitley rural industry based stocks are likely to perform better. Education, banking, infrastructure and housing sectors are also likely to gain on some key initiatives that may be announced in the budget.
The long-term capital gains tax, changes in corporate tax and likely withdrawal of Securities Transaction Tax (STT) can have a wide-ranging impact across sectors and hence cause volatility in the coming days. It is natural for various industries to make representations before the Finance Ministry on urgent policy changes needed for the sector including tariffs, taxes or other incentives. Any such announcements may have a positive impact on the stocks in that sector.
Here is a look at the key sectors that are more likely to be impacted by budget proposals:
Agro chemicals, tractors, seeds and implements are likely to gain out of budget proposals as an additional investment in agriculture sector and rural employment can have a positive impact on demand in these segments.
#Nagarjuna Chemicals & Fertilisers (BSE: 5339917, NSE: NAGAFERT) closed 1.4% higher 23.30 on Wednesday trade. MACD has witnessed a bearish crossover while RSI of 54.8 indicates bullish trend, ADX o 32.99 indicates uptrend.
#Gujarat Ambuja Exorts Ltd (BSE:524226, NSE: GAEL) has risen 7.48% to Rs 241.35 with technical indicators providing a mixed picture. ADX of 35 indicates uptrend, while MACD has witnessed a bearish crossover signalling selling opportunity, while RSI of 54 is bullish.
Banking Stocks are expected to witness uptrend on any announcements regarding the recaptilisation and the insolvency resolution mechanism. Despite the general downtrend seen on Wednesday, BSE Bankex gained 124.79 points to 30861.34 while Bank Nifty roe 0.40% to 27,379.45. The private sector banks are trending higher on better financial performance and expected economic growth while recapitalisation measures may help public sector banks to stay on top in investor focus.
With Indian banking sector currently under stress, gross NPAs are expected to rise from March 2017 level of Rs 8 lakh crore to Rs 9.5 lakh crore as on March 31, 2018 i.e. about 10.5 per cent of total advances, while stressed assets are expected to be at Rs 11.5 lakh crore, noted a just-concluded ASSOCHAM-Crisil joint study.
“High level of stressed assets in the banking system provides enormous opportunity size for asset reconstruction companies (ARCs) which are an important stakeholder in the NPA resolution process,” said an ASSOCHAM-Crisil joint report titled,
#Kotak Mahindra Bank Ltd (BSE: 500247, NSE: KOTAKBANK)
Kotak Bank may be expected to gain on further buying interest as MACD has witnessed a bullish cross over and RSI of 70 indicates bullishness while ADX of 27 indicates range bound trading. It is trading at a PE of 53.65 indicating higher valuation by market. In December quarter net profit had risen 28.24% on annualised basis to Rs 1624.24 cr while EPS has risen to 8.52.
Paper and Paper Boards
The industry body ASSOCHAM has requested the Finance Minister to re-impose 10% import duty on paper and paper boards from ASEAN nations in order to provide level playing field to domestic industry. The current demand for paper and paper boards in Indian market is 14.4 mn tons per annum (MTPA) that constitutes 3.6% of global demand and expected to increase to 20 MTPA by 2020.
Any reimposition of import duty on paper may have a positive impact on paper and paper board industry.
#J K Paper (BSE: 532162, NSE:JKPAPER) had witnessed a 94.51% growth in Q3 FY18 net profit at Rs 69.81 cr. Sales rose 24.92% at Rs 790.81 cr. On technical charts, RSI of 44 indicates bearishness, while MACD has witnessed a bearish cross over and ADX of 23.35 indicates range bound trade.
Housing and Affordable Housing-Realty, Housing Finance to gain
Housing and Affordable housing schemes and incentives can have a positive impact on realty and housing finance sectors. In recent times, government has time and again reiterated its efforts to make housing affordable to all.
With likely focus on development and employment generation, infrastructure sector is set to get a boost this budget season as more roadways, electricity generation, engineering and allied sectors are expected to gain.
# Larsen & Toubro Ltd (BSE: 500510, NSE: LT) Category: Large Cap
Larsen & Toubro is a diversified company with engineering, erection, procurement and commissioning activities with in India and abroad. It is trading at a PE of 47.3 indicating higher valuation by market. September quarter results were encouraging with a net profit of Rs 2020 cr while sales rose 6.11% to Rs 26.446.76 cr. On technical charts, MACD has witnessed a bullish crossover signalling buy while RSI of 73 indicates bullish overbought positions while ADX of 25 indicates range bound trading.
Pre and post budget days are quite volatile for stock markets as expectations are built up before the presentation and actual proposals immediately have an impact on the market. However, with most of the policy decisions also made outside the budget many of the factors discussed may have been factored in the prices of the agri focussed scrips already.