Jan 21, 2020
Karvy Stock Broking Research
is available on
Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Analyst Contact
Dr. Ravi Prakash Singh
040 - 3321 6300
ravi.singh@karvy.com
2
ECONOMY & STRATEGY
Expectations
y Correction of inverted duty structure for capital goods.
y More allocation of funds towards UDAY scheme which was not so eective in its earlier
phase. Bringing in a new UDAY phase 2 with stricter guidelines and improved controls.
y Continued allocation for Dedicated Fright Corridors and related allocation in order to
speed up the completion of projects.
y Allocation of more budget for Railways for completing the target of 100% electrication
by 2022.
Key Beneciaries
y KEC International, Kalpataru Power, Thermax, L&T and KNR Construction.
CAPITAL GOODS
Expectations
y Cut in personal income tax rates to provide more disposable income in the hands of the
consumer.
y Bail outs or continued measures to ease stress on NBFCs to help revival of the
unorganized sector.
y Relief packages to ease the burden on stressed sectors such as agriculture, automobile,
aviation, telecom, real estate, etc., which indirectly will aid in demand for discretionary
and non-discretionary products.
Impact
y Given the requirement of an impetus for growth, we expect steps towards increasing
consumption to be the main focus in the upcoming budget. Despite these measures, the
personal care segments may take time for a recovery in demand – can expect a lag of
couple of quarters compared to the FMCG segment.
Key Beneciaries
y HUL, Godrej Consumer, V-Mart Retail, Jyothy Laboratories Ltd., Emami Ltd.
FMCG AND CONSUMER DISCRETIONARY
3
ECONOMY & STRATEGY
INFORMATION TECHNOLOGY
Expectation
y We expect the government to extend tax sops for SEZ units by another 5 years. If not, at
least to keep the SEZs notied till date outside the purview of the new laws
y Companies are seeking relief on 20% tax rate on share buybacks announced in Budget
2019.
y Amend dividend tax laws such that tax is levied in the hands of the receiver and not the
dividend payer
y Industry expects either reduction or abolishment of MAT altogether on the export
revenues from SEZs. During Budget 2019, government reduced MAT from 18.5% earlier
to 15%.
y Sector is seeking revival of tax holiday for companies that do R&D in niche technologies
like AI (Articial Intelligence), robotics, AR/VR, etc.
Impact
y IT sector contributes approximately 8% of total GDP and provides employment to 40 Mn
people, this sector is of very important to the government given the kind of investment it
undertakes and the second round impact it has on the consumption. Tax relief for SEZ
units should promote investment by IT companies and aid overall economy.
y Additionally, tax related benets like change in dividend tax incidence should enable
companies to return the unused cash on their balance sheet more meaningfully and help
them allocate capital more eectively.
Key Beneciaries
y Infosys, TCS, Wipro, HCL Technologies, Tech Mahindra and all other mid cap IT rms.
4
ECONOMY & STRATEGY
Expectation
y The price for aordable housing is capped at Rs. 45 Lakhs. Increasing this limit will help
in reviving the pre-sales volume of listed players.
y Increasing allocation of funds for schemes like PMAY (Pradhan Mantri Awas Yojana) for
achieving the target of Housing for by 2022.
y The NBFC crisis has hit the sector hard and many developers are unable to raise fresh
funds. The Government may look into relaxing the NPA recognition norms for real estate
industry. This will help the sector in attracting fresh funds and kick start stalled projects.
y The current tax exemption limit of Rs. 3.5 Lakh for aordable housing should be enhanced
to further incentivise the buyers.
Key Beneciaries
y Sunteck Realty, Sobha, Prestige Estates, Godrej Properties.
REAL ESTATE & HOUSING
Expectation
y Schemes to strengthen farm, health, and pension policies is expected to be on cards
this budget
y Increase in FDI in the core insurance sector from 49% to 74% is expected to be proposed
for single line insurers after the latest announcements to include life insurers to issue
health insurance policies in India.
y Budget announcements may include capital infusion of Rs. 2500 Cr. to improve the
operational health and to facilitate the merger process of public general insurance rms.
Impact
y Micro insurance schemes will be strengthened with the action taken including micro
lending by banks and NBFC sector rms in India which will invite more players in the
micro lending and distribution ecosystem.
y General and single line health insurers will benet from the announcement to open
new infrastructure expansion with life insurers to increase distribution reach via bank
assurance.
Key Beneciaries
y All insurance rms with banks’ parentage such as ICICI Lombard General, Bajaj Finserv,
ICICI Prudential Life, SBI Life, HDFC Life and micro insurers will benet alike on volume
growth with increased reach with lower premium products via cost eective online
distribution platforms either through tie-ups with platform like Paytm or develop on their
own.
INSURANCE