Sectors to focus on ahead of Union Budget 2024

Smart investors remain watchful and keep rebalancing their portfolios to ensure that their investment targets are met amid a dynamic and volatile market environment.

As the Modi 3.0 government prepares to present its first Union budget on July 23, investors are again reexamining their portfolios amid all the speculation. The budget announcements may significantly influence market trends.

Investors and market observers expect Finance Minister Nirmala Sitharaman to make big-ticket announcements that could unlock fresh investment opportunities.

If you are also in the process of reviewing and tweaking your stock holdings, take a look at some of the sectors that may come under FM Sitharaman’s radar in the upcoming Full Budget for FY 2024-25:

Manufacturing

With job creation as one of its biggest agenda, the government is expected to introduce measures to promote labour-intensive manufacturing in the Union Budget 2024. Experts anticipate a boost for sectors such as toys, textiles, and apparel manufacturing amid an overall expectation of incentivising manufacturing. The production-linked incentive (PLI) scheme may also be extended to other sectors such as footwear, leather, gems and jewellery, and space among others.

Investors should, therefore, ensure that their portfolios have a fair share of quality stocks from the Indian manufacturing and capital goods sectors. These stocks are engaged in making machinery, equipment, and tools, which are essential for the manufacturing sector's business operations.

Infrastructure

The infrastructure sector refers to companies that build and maintain essential physical structures and systems, such as roads, bridges, power utilities, transportation networks, hospitals, and educational institutions.

For the past ten years, the current government has remained focused on increasing capital expenditure on the infrastructure sector and is expected to continue doing so to meet the long-term vision of a ‘Developed Nation’ by 2047.

Investors should be wise to keep an eye on largecap infrastructure and construction stocks that may become direct or indirect beneficiaries of the government’s infrastructure push.

Railways and defence

If recent developments provide any clue, Sitharaman is likely to give special attention to the railways, defence, and shipping sectors in the upcoming budget. Railway Minister Ashwini Vaishnaw recently announced major expansion plans for the Indian Railways, such as the target of producing 10,000 non-air-conditioned (non-AC) coaches over the next two years.

The defence allocations, too, may see increased allocation driven by geopolitical tensions and the need to strengthen border infrastructure. Investors can therefore consider adding stocks from these sectors to their portfolio for long-term stability and returns.

Agriculture

Sitharaman is expected to provide necessary impetus to India’s agriculture sector in this year’s full budget to boost rural economy and for the overall welfare of the farmers. Apart from taking measures to boost production, the government may also focus on farm mechanization, improved marketing infrastructure and easier credit access for farmers. As a result, companies related to the agriculture and fertiliser sectors could be in focus.

EVs and green energy

Electric vehicles (EVs) and green energy have proven to be emerging trends in the government’s recent policy decisions. The interim budget 2024 announced the expansion of the EV ecosystem and support for charging infrastructure. Experts are also expecting tax benefits on the sale of EVs and select hybrids in the coming budget to boost the popularity of such vehicles.

The government’s focus on the green energy sector is also likely to continue amid the ambitious target of achieving a renewable energy capacity of 500 GW by 2030.

To sum up

Anticipated government incentives for these sectors may drive market trends and create new investment opportunities in the above-mentioned sectors. Also, top companies from these sectors could see strong investor traction and high volatility. Hence, investors are advised to do risk due diligence before trading and investing.