Budget delivers a big boost for consumption-related stocks: Analysts

The Budget has put more money in the hands of the people through relief from Income Tax, which is a very positive step, analysts said

The Budget 2023 proposals unveiled by the finance minister on Wednesday will go a long way in boosting consumption, said analysts, who suggest investors buy the related stocks from a medium-to-long term perspective.

The capital expenditure (capex) outlay for 2023-24 is proposed to be hiked by 33 per cent to Rs 10 trillion, Finance Minister Nirmala Sithraman said. The outlay for the PM Awas Yojana, too, will be hiked by 66 per cent to Rs 79,000 crore.

That apart, the proposals have recast the income-tax slabs (in the new regime) with the rebate limit being raised to Rs 7-lakh from the existing Rs 5-lakh. The lowest slab of tax has also been raised from Rs 0-2.5 lakh to Rs 0 - 3 lakh. The proposals, analysts said, will leave the taxpayers with more money in their hands and can provide an impetus to consumption, which in turn can boost the related stocks at the bourses.

"The Budget has put more money in the hands of the people through relief from Income Tax, which to our mind is a very positive step," said S Ranganathan, head of research at LKP Securities.

In the last six months, the Nifty India Consumption index has been an underperformer, falling over 2 per cent. The Nifty50 index, meanwhile, surged nearly 3 per cent during this period, data show. Mahindra & Mahindra (M&M), ITC, Bharti Airtel, Britannia Industries, Godrej Consumer Products and Eicher Motors were among the top performers in this period and gained between 5 per cent and 19 per cent.

"The rationalization of the personal income tax structure is expected to lead to two things: (i) raise disposable incomes for the middle class and particularly younger taxpayers (ii) transition the taxpayers to the new tax regime with minimal exemptions and lower and simpler tax slabs. This is expected to give a moderate boost to domestic consumption," said Suman Chowdhury, executive director & chief analytical officer, Acuité Ratings & Research.

Tax exemptions under the new tax regime, according to a note by ICICI Securities, will provide increased disposable income in the hands of salaried consumers, which will help boost demand for small and large home appliances thus benefiting Havells, Bajaj Electricals, V-Guard, etc.

Among the lot, A K Prabhakar, head of research at IDBI Capital is bullish on automobile and hotel-related counters, which he believes will be the immediate direct beneficiaries of the Budget 2023 proposals.

“More money in the hands of taxpayers, I believe, will be spent on buying automobiles and recreational activities instead of 100 per cent additional money getting saved. This will benefit auto and hotel-related stocks. Another category that will benefit will be credit cards as people spend more. I remain bullish on SBI Cards as a result. One can buy from a medium-to-long term perspective, Prabhakar said.