10 stock ideas, top themes to bet on ahead of Budget 2023

NEW DELHI: Ahead of Finance Minister Nirmala Sitharaman's Budget speech on February 1, stocks related to infrastructure, manufacturing, capital goods, defence and rail, besides PSUs, are enjoying the limelight on Dalal Street.

So far in the month, BSE Capital Goods, BSE Metal and Nifty PSE indices have been among the top gainers even as the headline index is lying flat.

Morgan Stanley's top equity strategist Ridham Desai said if the government focuses on consolidating the fiscal, financials are expected to outperform. If it prefers spending, consumer discretionary and industrial stocks will likely fare better. He is overweight in all three sectors.

Global brokerage firm Nomura believes Budget focus areas could include ‘subtle’ support of consumption, a strong focus on manufacturing with an emphasis on MSMEs, higher infrastructure spending, asset monetisation, and agriculture and rural spending.

“In this budget, there are high expectations that the government will continue to focus on allocating more funds in infrastructure space and that would help drive growth for sectors such as auto, FMCG, cements and consumer durables,” Religare Broking said.


Here are 10 stock ideas ahead of Budget from top brokerages:

1) M&M
M&M is one of the leading automotive companies operating in utility vehicles, commercial vehicles and farm equipment. We are positive on the company's growth prospects driven by new product launches, capacity expansion and its venture into the EV segment. Easing commodity prices and premiumization would help margins to grow.

(Religare Broking)

2) Dabur India
With the government's focus on improving the rural sentiments, we expect an increase in the budgetary allocation under the MNREGA and other rural development schemes. This would support growth for rural-centric companies like Dabur India (rural India contributes ~50% to Dabur’s revenue) as any boost to rural demand would aid in the company’s growth. The target price is Rs 675.

(Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas)

3) Finolex Cables
Expansion of the PLI scheme to manufacturing of 5G equipment and efforts towards improvement of agrarian and rural economy, through various rural schemes such as MNREGA would benefit players like Finolex Cables. The target price is at Rs 660.

(Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas)

4) IRCON International
The government has a strong focus on railway electrification and IRCON International is a great proxy to play that. It has a net cash of Rs 3,600 crore which is 60% of its market capitalization. The dividend yield is at 4.7%. Add on dips with a target price of Rs 71 (7.1x FY24e EPS) on account of healthy order book, strong execution capabilities, robust order pipeline and stable EBITDA margins.

(Stoxbox - Swapnil Shah, Director, Research)

5) ITC
We envisage a moderate tax scenario for cigarettes and the improving margin profile across its business verticals resulting in free cash flow generation, thereby enhancing prospects of a de-merger going forward.

(LKP Securities)

6) HAL
We expect an increase in the budgetary allocation for defence, railways and infrastructure. This bodes well for leading players like HAL and L&T. HAL target price is at Rs 2,977

(Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas)

7) PSP Projects
PSP Projects has the highest-ever order book of Rs 51 billion (~2.9x FY22 revenue), well diversified across institutional, industrial, government infra and residential projects, and private residential projects located in six different geographies.It is well placed to take advantage of the government’s focus on infrastructure development, revival in the real estate industry and emerging opportunities in construction space.

(Stoxbox - Swapnil Shah, Director, Research)

8) PNC Infratech
Increased outlay towards roads from Rs 1.99 lakh crore in FY2023 to Rs 2.1 lakh crore to Rs 2.5 lakh crore for FY2024. Similar or higher allocation towards Jal Jeevan Mission from Rs 49,758 crore in FY2023 can act as a catalyst for the stock.

(Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas)

9) UltraTech Cement
UltraTech’s leadership position along with its capacity addition and debt reduction plans bode well for the future and this would give an edge to the company over other players. Further, demand visibility, improved realization and utilization from existing capacities would aid in better volume growth.

(Religare Broking)

10) Macrotech
Fulfillment of demands pertaining to real estate like increase in rebate on housing loan interest rates, increase in deduction for principal repayment of housing loans, reduction in capital gains tax and holding period, and capping of GST rates for under-construction properties would provide strong fillip to real estate demand benefitting Macrotech. Target price: Rs 1,378.

(Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)