Budget 2024: Realty, banks, defence among 9 sectors that appear short term losers. Here’s why

As the dust around the Union Budget 2024 settles down, potential losers in the market as a result of announcements or rather lack of it, are coming to the fore. Sectors that are likely to get negatively impacted in the near term are banks, NBFCs, asset management companies (AMCs), real estate, consumer, defence, OMCs and select stocks in the new age space according to estimates by top brokerages.

Here’s what they say on sectors, stocks:

1) Banks & NBFCs
Macquarie in its budget review note sees absence of tax breaks on deposits as a near term negative for the sector.2) Asset Management Companies
JM Financial sees hikes in the Long Term Capital Gains (LTCG) and Short Term Capital Gains (STCG) as net negative for AMCs as over 70% revenues come from equity schemes which now could make it less attractive compared to FDs.The government hiked LTCG to 12.5% versus 10% earlier and STCG to 20% versus 15% earlier. According to JM, HDFC AMC, Nippon Life Asset Management India (NAM) and UTI AMC are potential near-term fallouts.3) Real Estate
The withdrawal of indexation benefits is a negative for the real estate stocks, Macquarie noted. The view is also endorsed by JM Financial Institutional Securities.

Finance Minister Nirmala Sithraman on Tuesday announced reduction in long-term capital gains (LTCG) on property sales from 20% to 12.5% along with the removal of indexation benefit, which adjusts purchase price for inflation and reduces taxable profit.

As per JM’s calculations, the new LTCG regime will increase the cost of holdings by 2-3% with impact varying across micro-markets and time periods. It has named stocks like DLF, Macrotech Developers, Prestige Estates among potential losers along with listed REITs.

4) Infrastructure
While the government has allocated Rs 11.11 lakh crore for infrastructure development which was a status quo on the interim budget, the expectation was for a higher outlay from a section on the D-Street. Macquarie does not see it as a positive for infrastructure companies as it said that there is no increase in allocation towards capital expenditures.

5) Gold loan companies
The government announced a cut in the customs duty on gold and silver to 6%. “To enhance domestic value addition in gold and precious metal jewellery in the country, I propose to reduce customs duties on gold and silver to 6 per cent and that on platinum to 6.4%,” the budget speech said.

InCred sees this reduction in customs duty as a short-term negative for the gold loan companies like Manappuram Finance and Muthoot Finance. A fall in gold prices is the biggest risk to gold loan companies as it may result in sporadic repayment by borrowers as the value of the ornaments may fall below the value of the loan, it said in a note.

Gold prices have jumped by 16% in 2024 so far, which has led to higher lending by gold lenders on the same quantity of gold and, in turn, boosting gold loan AUMs in recent quarters, it said.

6) Consumer Overall
InCred also sees allocation of Rs 86,000 crore made towards Mahatma Gandhi National Rural Employment Guarantee scheme (MNREGA) for FY25F (Budgeted estimate) flat on the year-on-year basis compared to the Revised Estimate, which in-turn is lower by 5% YoY when compared to FY23 actuals.

As for Pradhan Mantri Kisan Samman Nidhi (PM Kisan), the budgeted estimate of Rs 60,000 crore for FY25F is also the same as the Revised Estimate of FY24F and is 3% higher YoY compared to FY23 actuals. There has been no change to allocations under PM Kisan since the interim budget, it said.

The brokerage estimates a neutral impact as a result of these measures despite the positives of a 40% higher allocation of (Rs 2.7 lakh crore) towards rural development and provision of Rs 1.52 lakh crore for agri and allied activities among other initiatives.

7) Defence stocks
D-Street was betting big on the defence sector but appeared a touch disappointed on the budget outlay to the sector at Rs 4.54 lakh crore for FY2024-25 — a significant climbdown from Rs 6.21 lakh crore allocated by the government in the February interim Budget.

Elara Capital in a note said that the allocation failed to live up to the high expectations the markets were pricing-in. Allocation to this brokerage, the naval fleet has not changed from what was laid out in the interim budget, while that to heavy and medium vehicles rose 12%.

It called it a change in “defense priorities” adding that the anticipation of additional announcement towards defense, specifically Navy, had led to a re-rating within the sector, with prices of Cochin Shipyard, Garden Reach Shipbuilding and Mazagaon Dock up by 296%, 197% and 133%, respectively.

Also Read: Defence stocks HAL, Bharat Dynamics, others recover from 10% fall post budget jitters

8) New age stocks
According to Macqurie’s estimates government thrust on grassroots job creation, skilling, internships could help expand the formal workforce and as such potentially increase cost of gig labour. As a result, Zomato and Delhivery could be losers from the budget announcement, it said.

9) OMC Stocks
Stocks of oil marketing companies (OMCs) have recovered after a negative closing on Tuesday. They ended in the red after the Union Budget 2024 did not make any budgetary allocation for them for FY25. The development assumes importance given that the government had in its FY24 budget earmarked Rs 30,000 crore for capital support to the OMCs which did not crystallise the financial year gone by.

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