Domestic financial major Motilal Oswal Financial Services, in its budget review, has said that the Union Budget would boost demand in auto and real estate as concessions in the income tax would give more disposable income in the hands of the investors.
The brokerage has also raised its weightage on domestic themes that include financials, autos and infrastructure. Among the large cap stocks, the brokerage is bullish on HDFC Bank, Bank of Baroda, Bajaj Auto, Maruti, BHEL, ACC, Cipla, ITC, Unitech, and Idea.
"The most important positive has been concessions on personal income tax, which will release significant amounts for discretionary spending. This will boost demand for autos, real estate and various savings products," says the report. Movement to DTC and GST from April 2011 will be key reforms to watch for, it goes on to add. The brokerage also expects oil sector reforms to be announced in the first half of the current calendar year.
While the brokerage says that the partial withdrawal of the stimulus measure through a two per cent hike in excise duty was on expected lines, the additional hike in duty on auto fuels and steep hike in excise duty for tobacco was unexpected.
It also feels that a high disinvestment target of Rs 40,000 crore would call for stake sale in several state-owned companies over the next 12 months while the revenues of Rs 35,000 crore from 3G auction would be crucial for achieving growth estimates.
Motilal Oswal is expecting earnings growth to return strongly, with an EPS CAGR of over 20 per cent in FY10-14, with FY11 EPS likely to grow by 31 per cent. "This coupled with the several reforms that the government proposes over the next 12 months would provide several investment opportunities," it explains.
