5 sectors to watch out for in FY2022: So, the gong has been sounded and the economic roadmap for the year is ahead of us. The government, known for its fiscal prudence, surprised everyone with a fiscal deficit of 9.5% as it is determined to revive growth. And, the capital market did not overlook the same. It reacted well and went on to create a new all-time high. This year, the budget also reflected India’s ongoing digital transformation as the Hon’ble Finance Minister ditched the bahi-khaata with a Made-in-India tablet.
But what are the key takeaways of the budget and in what all sectors should you invest? Well, fret not. Allow us to explain 2021’s #BudgetKaMatlab and highlight 5 sectors that you should keep an eye on in FY2022. Here they are:
Of late, the automobile sector had been one of the worst-hit segments owing to its dependency on physical purchase. It was looking towards the budget with a lot of expectations. The Finance Minister did not let its expectations go in vain. The government finally announced the long-awaited Voluntary Scrappage Policy. The policy extends incentives to people and businesses to scrap their 15- to 20-year old vehicles and purchase a new one. It will benefit OEMs (Original Equipment Manufacturers) and electric vehicle manufacturer companies in India. Commercial vehicles will undergo fitness after 15 years while personal vehicles will undergo the same after 20 years.
Another major development was the Urban Infrastructure Scheme, wherein innovative PPP models will empower private sector players to finance, acquire, operate, and maintain more than 20,000 buses. It will greatly support Indian bus manufacturers. Custom duty has also been increased on specified auto parts such as ignition wiring sets, parts of signaling equipment, safety glass, and so forth from 7.5% and 10% to 15%. Auto Ancillary companies stand to benefit from the same.
Banks & Financial Services (BFSI):
In order to strengthen the financial capacity of PSBs, the government has proposed a further recapitalization of ₹20,000 crores. It will improve the balance sheets of public sector banks. The existing debt will also be transferred to a new bad bank via Asset Reconstruction Company (ARC) and Asset Management Company (AMC). It is another positive for public sector banks and will solve their stressed asset problem. Housing Finance Companies (HFCs) will further benefit from the tax holiday for affordable housing. It will also add to the real estate companies working in the affordable housing space.
The government has announced an outlay of ₹64,180 Crores for 6 years to augment the capacity of the Indian healthcare system. It will strengthen existing national institutions while also paving the way for new institutions. The development is a big win for the pharma sector, especially the companies having higher domestic sales. There has also been a significant increase in the budget outlay for Health and Wellbeing. It is increased to ₹2,23,846 crores in FY2022, which is more than double of ₹94,452 crores in FY2021. ₹35,000 crores have further been allocated for the COVID-19 vaccine in FY2022. The initiative will benefit vaccine manufacturers and there are chances of the outlay increasing.
In the next 5 years, the government intends to spend ₹1.97 lakh crores on various PLI schemes. This outlay is over and above the PLI scheme of ₹40,951 crores announced for the electronics sector. It will greatly benefit the Indian manufacturing industry. Custom duty has also been increased on specific inputs, parts, or sub-parts of mobile phones including Printed Circuit Board Assembly (PCBA), camera module, and connectors from 0% to 2.5%. Indian mobile manufacturing companies stand to benefit.
Gold, Diamond, Gems, & Jewelry:
Customs duty on gold and silver has been decreased from 12.5% to 7.5%. However, the same for Synthetic Cut and Polished Stones (Gems) is now increased from 7.5% to 15%. Agriculture Infrastructure and Development Cess of 2.5% has also been implemented on Gold, Silver, and dore bars. The net effect of these moves will be positive on jewelry companies. Indian Gems and Jewelry companies also stand to benefit.
So, these were 5 sectors that will get fuelled by this year’s budget. You can build your position within these segments as per your focus area, investment goals, and risk appetite. Some of the other segments and sub-segments that you can look forward to including Real Estate, Cement, Infrastructure, City Gas Distribution, Power, Insurance, and Household Appliances.
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