Union Budget: 5 Top Stock Picks For FY 2020

Union Budget 2020: Reflection of a strong mandate, targets for a growth equilibrium

The Union Budget of 2020 has pegged the fiscal deficit to 3.3% against 3.4% as estimated in the Interim Budget has come as major surprise, and bond and INR has responded accordingly with gains. From Global ratings perspectives, India has made a case through this number to ask for a better rating after slew of NBFC crisis in the country.

The fiscal math may look too ambitious, it puts to rest naysayers on domestic growth factors and investors may stay put in Indian markets, especially foreign investors.

PSU Bank recapitalization amount of INR70000 crores would provide the much needed growth capital and PSU divestment target of INR105000 crores for FY20 is also robust initiative. INR400000 crores recovery through IBC is positive for PSU Banks.

Proposal to bring public holdings in companies to 35% from 25% after SEBI’s approval has both, positive and negative implications.

A larger float in companies is likely to raise MSCI weightage in Indian companies, thereby evincing global investor’s interest in Indian equities. However, some MNCs may delist shares from Indian market post its implementation.

The Union Budget 2020 has put to rest expectations from high income elite class of any sympathy with respect to taxation and raised surcharge on direct tax by 3% between income of INR2-5crores and by 7% above 5crores.

As if this was not enough, the unanimous demand to do away with dividend distribution tax was met with 20% tax on buyback of listed shares, putting to rest any such recommendations in future. From capital market perspective this may not augur well as buybacks are earnings accretive and increase shareholder value, thereby raising interest in equity investments.

Road Cess on petrol and diesel does not bode well for the already sagging automobile industry. However, indication of a software oil prices in FY20 in the Economic survey may negate the actual impact. Also, GST on EV from 12% to 5% may shift manufactures and buyers towards EV, raising demand of Electric vehicle and partially meeting environment norms.

Reduction of Corporate Tax for companies up to turnover of INR400crores from INR250crores to 25% is a move in the right direction. Doing away with Angel tax and several measures to boost investment in SMES may help generate employment. Investment of INR100 lacs crores over a period of 5 years in infrastructure development, thrust on farm sector, and other socio-economic measures is likely to spur growth and employment in the country.

As laid down in the Economic Survey, the Union Budget 2019-20, lays the blueprint for a $5trillion economy through data and behavioral science to set the virtual cycle of investment, growth and employment in the country.