The budget is just a few hours away and investors are eagerly awaiting it. Even though the impact of the Union budget on the equity market has declined in previous years, it is still an important event for investors. These sectors have a lot riding on this budget.

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Investors are expecting a higher allocation (25-30%) to the Ministry of Road Transport and Highways. The infrastructure space is at an inflexion point with both central and state governments focusing on ambitious projects to stimulate growth. Moreover, the capex cycle is turning. The government has identified renewable energy, roadways, railways, and water sources as notable targets for the expansion of capex.

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Metals and mining

Steel prices have increased in recent months and this has impacted MSMEs. The government in the last budget reduced the basic customs duty on steel imports. In the upcoming budget, the government is likely to keep the duty the same or reduce it further. The Indian Steel Association (ISA) wants the basic customs duty on coking coal, stainless steel scrap and nickel to be reduced to nil from the current 1%+1.5% agriculture cess since the availability of these raw materials is low.

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The government came up with a PLI scheme for the pharma sector and also introduced incentives for drug R&D. The government is expected to widen the scope of Section 80D to allow all age groups a deduction for expenditure incurred on medical treatment for Covid-19 for themselves and their families members and raise public investment in healthcare infrastructure from the current 1.29% of GDP.

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The Apparel Export Promotion Council (AEPC) expects the central government to encourage investment in green energy and eco-friendly technologies by offering tax benefits along with simplifying the clearance of import goods from FTA countries. The apparel industry urges the government to abolish 5% import duty and impose an export duty as the price of raw cotton has been increasing steeply. This will help stabilize the price of cotton in the domestic market.

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Prashant Khemka, Founder of White Oak Capital Management, sees value in select IT stocks from a longer-term perspective. “Over the course of any reasonable time period measured beyond days or weeks, IT stocks would reflect the progress of fundamentals, and ultimately,  cash flow generation and growth thereof. IT has done extremely well over the last 12 months but that is because they started from very suppressed levels,” he said.  “The sector was sort of written off as a slow-growth sector for various reasons but the growth delivered has been strong,” he added. 

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Real estate

Hemang Jani of Motilal Oswal Financial Services has a positive view of the real estate sector. “We feel that this could be a 2-3 year kind of cycle because of the kind of uptick that we are seeing and the inventory cleaning up that is witnessed. We think that people would really want to own real estate in their portfolios and within that, we have a liking for names like Lodha and Oberoi, because of better traction and better valuations,” he said. Jani also has DLF and a few Bangalore-based companies on his preferred list. “We think both Lodha and Oberoi are looking quite interesting given the kind of traction and the valuation comfort,” he said.