IN SEARCH OF A BOOSTER SHOT

TO BOOST GROWTH, THE GOVERNMENT MAY FOCUS ON INCREASING CAPEX AND BOOSTING DOMESTIC CONSUMPTION, PARTICULARLY TARGETING THE MIDDLE CLASS. THIS COULD PROVIDE A FILLIP TO STOCKS IN THOSE SECTORS

- RAHUL OBEROI

INDIA INC. IS brimming with expectations as Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2025-26 on February 1. Several sectors are anticipating measures that will revitalise the economy, which has slowed in recent quarters. Equity investors, too, are looking for signals from the Budget to understand the policy direction of the government. According to the First Advance Estimates, India's economy is likely to grow at 6.4% in FY25, much slower than the 8.2% in the previous fiscal, and at a 4-year low.

"We may see actions [in the Budget] aimed at pushing growth in both the capex and domestic consumption for the middle class," says Ruchit Mehta, Head of Research at SBI Mutual Fund.

The upcoming Budget presents an opportunity to address challenges like food inflation, subdued urban consumption, and sluggish private capital expenditure, notes Gurpreet Sidana, CEO of Religare Broking. "Measures such as reducing import duties on essential food items, improving agricultural supply chains, and investing in cold storage infrastructure could lower input costs and spur consumption, positively impacting sectors such as agriculture, FMCG, and infrastructure," he says.

There's some rationale for such optimism. In recent years, the government's thrust on sectors such as infrastructure, renewable energy, healthcare, and manufacturing has proved beneficial, generating positive momentum and significantly rewarding stocks in this space. For instance, the allocation to the Ministry of New and Renewable Energy surged 153% to ₹19,100 crore over the past two years, driving growth in the sector. Since the last Union Budget, the benchmark Nifty 50 rallied surged 9.2% to 23,689 with sectors such as defence, consumer durable leading with 49% and 33%, respectively, surge (see chart).