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India Strategy: Union Budget FY27: Not-so-high expectations

* The forthcoming FY27 Union Budget has to strike a deft balance of sustaining growth momentum and maintaining fiscal consolidation, even as it also needs to address near-term challenges emanating from unprecedented geopolitical flux. In our discussions, we sensed that investors do not expect large substantive measures as the FM grapples to address multiple variables – thus setting the base lower for some positive surprise. The scope of influence of the budget has become relatively narrower over the years, owing to a flurry of extra-budgetary steps – hence, equity markets will be assessing it for targeted, selective measures to drive growth in certain sectors and to assuage investor sentiments

* In this note, we showcase expectations of our analysts for key sectors. By parsing aggregated views, we infer that there is likely to be focus on the following areas: 1) higher capex across sectors such as defense, infrastructure, affordable housing, power, capital goods, etc.; 2) few capital market measures aimed to assuage investor sentiments, 3) measures aimed to aid flows into smaller lending segments such as MFIs, MSME loans, etc.; 4) FM may announce several procedural reform measures as well, continuing with the GoI’s endeavors to improve the ease of living and ease of doing business. Key stocks/sectors likely to benefit if expectations play out: L&T, ABB, Siemens, Hitachi, Siemens Energy, KEC, Bharat Electronics, Bharat Dynamics, HAL, Ultratech, JK Cement, Polycab, KEI, Crompton, Titan, PN Gadgil, Niva Bupa, AMCs, RTAs, most HFCs, MFIs, Infra players, IGL, Mahanagr Gas, Gujarat Gas, Petronet LNG, GAIL, Waaree, Premier, NTPC, Tata Power, Acme, NTPC Green, Brigade, Prestige, Sobha, Lodha, Godrej Properties.