What cues does the Budget offer investors?

Thanks to the stellar rally the last 18 months, India trades at a premium to not just its own historical average but also to peers such as China, Brazil and Hong Kong.

With the market no longer cheap and the days of easy money almost over, the investor is looking for bankable themes.

From the Budget proposals, it appears that companies in the infrastructure, IT and telecom, tourism, and cement sectors are set for a big boost.

The Budget has addressed the infrastructure sector's core issue of fund availability to execute projects. The move to set up a National Investment and Infrastructure Fund and the return of tax-free infra bonds will provide the much needed lifeline to the ailing sector.

Infra allocation Increased allocation to create infrastructure such as roads and rail lines will improve the sector's growth visibility. In addition, the roads sector will get a boost from the diversion of a portion of the excise duty on petrol and diesel to the cess. “Diverting the increased excise duty towards road infrastructure is a good use of the higher revenues,” says Nandkumar Surti, MD & CEO, JPMorgan AMC. “Speedier award of public contracts can be a major positive for infrastructure and construction companies that are tangled in red tape,” says Tushar Pradhan, CIO, HSBC Global Asset Management, India.

So, which companies will benefit from these measures? Engineering conglomerate L&T, IVRCL, National Construction Company, Sadhbhav Engineering and KNR Construction are set to make the most of the Budget’s largesse to infrastructure. As a trickle down effect of the infrastructure push, increased construction activity will spur the demand for building materials such as cement and steel.

Besides, the Centre’s plan to build six crore homes for the rural and urban poor should push up demand for cement.

Beyond infrastructure, IT and telecom space has got a booster shot from the Budget. The decision to connect 2.5 lakh villages by optical fibre cable will benefit broadband service providers such as Airtel, RCom and BSNL.

The higher allocation to e-learning augurs well for companies in the training and education space such as NIIT and Educomp.

Fillip for tourism Travel and tourism industry will get a fillip from the move to expand the visa-on-arrival facility to 150 countries from the current 43.

Higher tourist arrivals will improve the occupancy rates of airline companies. The virtuous cycle on this front will improve the prospects of companies in the hospitality and leisure space such as Indian Hotels, EIH, and Leela.

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