Expert view:Focus on defence, railway, infra and fertiliser stocks ahead of Union Budget 2024, says Atul Parekh of Bigul

Expert view: According to Bigul CEO Atul Parakh, the market will be especially watching for announcements about tax slabs and potential changes that could impact the equity markets, like changes to the Securities Transaction Tax (STT), changes to the F&O tax regime, or adjustments to the long-term or short-term capital gains taxes. It will be favourable for the market if there are no adverse changes in these areas.

In an interview with Mint, Parakh discussed the possibility of increased government capital spending on the power, railway, and infrastructure sectors. He additionally suggested some stock ideas and trading strategies for investors to consider.

Edited excerpts:

Will the fiscal deficit be reduced or kept at the same level in the next Union Budget 2024?

In the upcoming Union Budget 2024, the approach to managing the fiscal deficit will be crucial. Given the anticipation of a populous budget with several significant announcements, there may be potential changes to the fiscal deficit. If the fiscal deficit is maintained at the current level, it will be highly favourable for the market, likely boosting market sentiment. However, if the fiscal deficit number with respect to GDP is increased, it could negatively impact market sentiment. Thus, the fiscal deficit strategy will play a pivotal role in shaping market reactions and the overall economic outlook.

Could the forthcoming Union Budget 2024 include a substantial capital expenditure (capex) on infrastructure developments? What are your views on this sector? Any stocks you think will increase in value over time.

The forthcoming Union Budget 2024 is likely to include substantial capital expenditure (capex) on infrastructure developments. If the capex budget remains at the previous level of ₹10 lakh crore or is increased, it will positively impact market sentiment, as continued investment in infrastructure is expected to bolster the Indian economy. An allocation exceeding ₹10 lakh crore would be particularly favourable, further driving economic growth and market confidence.

Regarding the infrastructure sector, I view it as a critical driver of economic development and a key area of focus for sustained growth. Stocks within this sector, such as Larsen & Toubro, Adani Ports, and UltraTech Cement, are likely to benefit from increased infrastructure spending and are expected to appreciate in value over time. The continuation and enhancement of infrastructure investments will undoubtedly provide a significant boost to these companies and the broader market.

Do you believe that the upcoming Union Budget 2024 will provide a sizable boost to the defence sector? What stocks would you recommend to investors, and how do you feel about the sector as a whole?

I believe the upcoming Union Budget 2024 will provide a sizable boost to the defence sector, as the Make in India approach is likely to continue. Over the past four to five years, the railway and defence sectors have been market favourites and have performed well. We expect the ongoing momentum of investments in the defence sector to persist, with the potential for more order flows and increased allocations in the coming budget.

Will the government boost capex on the railways and power sector as well?

Yes, we anticipate the government will boost capex on the railways and power sectors. We expect the government's ongoing push to continue the infrastructure theme, with similar inflows of capex in the power, infrastructure, and construction sectors, which will boost overall growth momentum. We also foresee further policy-related developments in these sectors, serving as a significant booster for economic activities in the country.

What could happen to the domestic equity benchmark indices following the Union Budget of 2024? Will it continue to reach all-time highs, or will there be drastic corrections?

Following the Union Budget of 2024, domestic equity benchmark indices are expected to remain positive, provided there are no negative announcements. If the Indian economy's strong growth trajectory continues without any adverse changes, the markets should perform well. The market is particularly focused on announcements regarding tax slabs and potential changes affecting the equity markets, such as adjustments to the Securities Transaction Tax (STT) or modifications to long-term or short-term capital gains taxes, as well as the F&O tax regime. If there are no negative changes in these areas, it will be positive for the market, and we anticipate the indices will continue to do well with some minor profit booking in regular intervals.

Could you provide some stock ideas and trading strategies to consider for the investors for the upcoming Union Budget 2024?

For the upcoming Union Budget 2024, I recommend investors consider stocks in the defence and railway sectors, as well as in the agro sector, such as fertilisers. Investors should focus on the infrastructure theme, the railway theme, and the defence sector, followed by some opportunities in the agro sector.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.