A top-down view

The Budget did not throw up any surprises for any sector. Experts continue to like what they did at the start of the year. The 'dream team' delivered, but well within expectations.

Infrastructure received a boost; banks were given autonomy and there was more focus on agriculture. The markets, too, seem impressed with the way things panned out. The Sensex soared to 6713, up 145 points, on budget day and continues to be on a roll.

When we try to shortlist sectors that offer better growth prospects, nothing seems to have changed - the favourite sectors pre-Budget remain so post-Budget.

For instance, infrastructure and FMCG remain favourites as the government retained its thrust on infrastructure growth and consumer spending.

In fact, experts say the budget is becoming less important for the markets as more sectors are opened up, personal tax structures are simplified and duties are rationalised.

However, sectors where there are external uncertainties - those that are likely to be affected by unfavourable global factors - may be avoided.

Vroom ahead
Consumers are smiling; so are manufacturers of cars and commercial vehicles (CVs). The reduction in excise duty on steel will bring down prices of vehicles. Combined with higher disposable incomes in the hands of consumers - as a result of the changes in the tax structure and low interest rates - this will drive demand for cars and commercial vehicles.

The increased thrust on agriculture and infrastructure will also translate into healthy volume growth for tractors and CVs. Moreover, the ownership of vehicles in India is among the lowest in the world which means there is a huge scope for growth.

"The forecast for GDP is good and this could induce bigger demand for vehicles," says Raamdeo Agrawal, joint managing director, Motilal Oswal Securities.

For the time being four-wheelers seem to be the favourite among marketmen. Prices of four-wheelers have not seen any increase yet. This leaves scope for an upside on back of the growth in demand.

Bankable
Banks remain the darling of the bourses. The sector, which is seen as a proxy for the economy, is getting all things right for itself. The finance minister, too, has contributed his bit, allowing banks to raise capital through the preferential route.

This will help them attract more capital, lend benignly, grow in size and stand up to their global peers. Corporates are firming up their capital expenditure plans and this is expected to result in a significant credit offtake for banks.

The key driver, however, will be retail. Banks stand to gain as the common man pulls his purse strings and yearns for more. Agricultural credit will also be a major driver (banks were wary of giving agricultural credit till systems got eased and recovery became less troublesome).

All this will enhance banks' advances portfolio. Moreover, banks have grown in terms of size and understanding competition over the last few years by lowering non-performing assets (NPAs) and incorporating technology.

Machine works
An all-time favourite. Though the Budget did not spell out anything clearly for the sector, the benefits the capital goods segment enjoyed still remain. The increase in infrastructure activity by manufacturing and power companies will benefit capital goods since they are the providers of machinery.

So the thrust on user industries will buoy this sector as well. Demand from all sectors is slated to witness a rise and this coupled with more budgetary allocation towards improvement and growth in infrastructure will drive up the segment.

The passing of the Electricity Act and the Accelerated Power Development and Reform Programme (APDRP) has resulted in a surge in investments in the power sector, boosting the order-books of capital goods manufacturers.

On the infrastructure side, there has been good progress in the Golden Quadrilateral project, while contracts for the North-South-East-West route are being awarded.

Building blocks
The Budget hasn't done much good for the cement industry, but it hasn't done anything bad either. The hike in excise duty on clinker is not expected to damage the prospects of major cement players and their offtake is expected to be robust.

The reduction in customs duty, too, will not affect domestic companies since the landed cost of cement will still be higher. Drivers of growth for the sector remain the same - the thrust on infrastructure and the growth in the economy and the housing segment.

With the housing sector expected to reach a near-boom, cement will the most sought-after commodity. As new buildings and roads come up, demand for building material will go up and cement companies will be the obvious gainers. The prices of cement, too, are expected to rise 10-15 per cent this year, making the sector a volume and price play.

Bargain deals
The worst is over for FMCG and the sector is set to be in the limelight once again. Last year and the preceding few years had not been good for the segment as major FMCG players saw plateauing margins and low product offtake besides increased competition from smaller and unorganised players.

But things are changing. With the government's focus on agricultural credit, rural spending must increase and help FMCG companies grow. Improvements in the potential of the consumer - one billion population, young demographics and low penetration and per capita consumption - are going to be the main driver for the sector.

"Demand and volumes are coming back, the price war is over and there is already a low base which will get growth back to the industry," says Jamshed Desai, head of research, IL&FS Investsmart.