Mumbai: Brokerage firms have cheered the budget’s focus on infrastructure and health along with the announcements on disinvestment plans.
Morgan Stanley has raised its 2021-end Sensex target to 55,000 from 50,000, which means a potential gain of 10% from current levels. The Sensex has surged 7.6% in the last two sessions and Nifty has gained 7.4%, recovering nearly all of the losses from the previous six sessions, due to relief over no new taxes and the government’s push for growth.
ET takes a look at what brokerages are saying about the budget and the way forward for the economy:
CLSA
- Fiscal deficit targets higher than estimates but for the right reasons
- No increase in direct taxes this time should come as a relief
- Positive for Larsen & Toubro and UltraTeh; no tax hike on cigarettes should be a positive for ITC
HSBC
- Broadly stable tax regime likely to bring economic certainty
- Focus on health and capital expenditure amid policy stability on the tax front is a positive, but execution will be key
Jefferies
- There is a clear change in stance from fiscal conservatism to growth orientation
- Fiscal assumptions are realistic and strong corporate earnings growth can mitigate the derating impact of higher yields
- Can be positive for banks and NBFCs as they stimulate growth
Credit Suisse
- Headline deficit is higher than expected but partly due to the inclusion of extra-budgetary spending, conservative revenue expectations and ambitious expenditure targets
- Positive for SBI, Ashok Leyland, ITC, L&T and negative for ICICI Prudential Life
Goldman Sachs
- FY21 and FY22 fiscal deficit significantly higher than expectations
- Budget more positive for equities and less so for bonds given the larger-than-expected supply and the slower pace of deficit normalisation
- Underlying spending pace is projected to fall in FY22 despite robust capex spending – with a lower overall fiscal impulse to growth than in FY21
Nomura
- Investment-led growth augurs well for a sustainable growth recovery from a long-term perspective but there are execution challenges
- Budget is positive for equities and helps improve narrative on growth which to that extent reduces risk to current earnings expectations
UBS
- Budget math seems realistic, quality of government spending seems to have improved
- Higher capex allocations could improve visibility for industrials
- Lays the groundwork for 7.5% plus growth in the medium term
JP Morgan
- Larger-than-expected headline forecast deficit but this is less likely to be punished in terms of ratings and yields
- Add industrials/cement weightage to the model portfolio due to increased focus on infrastructure; key cement sector pick is UltraTech
- Overweight on financials, neutral on IT/staples, and underweight on energy/consumer discretionary
Morgan Stanley
- Raise December 2021 Sensex target to 55,000 from 50,000; equity market sentiment buoyed by lack of any new income tax and push on growth
- If executed well, then this budget has the potency to lift the share of corporate profits in GDP and augmenting the strategic shift in government policy
