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Editorial

Union Budget 2022-23: Stocks Likely to Benefit

Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2022-23 in Parliament on February 1, 2022. The budget has included a set of important schemes that target different sectors of our economy. Let us take a look at some of the key highlights from the Budget presentation and the stocks that could benefit in the long term.

Boost for Infrastructure Sector

The Budget has given utmost importance to the development of core infrastructure across the country. Under PM Gati Shakti, the National Highway network will be expanded by 25,000 km in 2022-23. The PM Gati Shakti— National Master Plan for Multi-modal Connectivity is a digital platform that brings 16 Ministries (including Railways and Roadways) together for integrated planning and implementation of infrastructure connectivity projects. It aims to pull forward the economy and lead to more job creation.

As part of the project, 400 new-generation Vande Bharat trains will be manufactured in the next three years. Also, 100 cargo terminals will be established within the same period. The “One Station-One Product” concept will be popularised to help local businesses and supply chains.

Under PM Awas Yojana, 80 lakh affordable houses will be completed in 2022-23. An amount of Rs 48,000 crore will be allocated for this scheme. This initiative will give a significant boost to the steel, cement, paints, and other allied sectors.

The FM has announced an allocation of Rs 60,000 crore under the Har Ghar, Nal Se Jal project. It aims to provide clean drinking water to over 3.8 crore households in FY23.

Stocks That May Benefit:

Prominent highway-infra construction firms such as Larsen & Toubro (L&T), KNR Construction, Ashoka Buildcon, GR Infra are likely to benefit. IRCTC and the Indian Railway Finance Corp (IRFC) may benefit from the developments in the Indian Railways. Other stocks to be watched in this space include Tata Steel, SAIL, DLF, Godrej Properties, UltraTech Cement, etc. You can read marketfeed’s analysis of the paint and real estate industries. 

Stocks related to pipe manufacturing and water treatment can be watched. This includes Astral Ltd, Prince Pipes & Fittings Ltd, Supreme Industries, Finolex Industries, Va Tech Wabag, etc.

Boost for Energy Transition

The Indian government aims to facilitate domestic manufacturing of 280 gigawatts (GW) of installed solar capacity by 2030. The Finance Minister has announced an additional allocation of Rs 19,500 crore towards a Production Linked Incentive (PLI) scheme for manufacturing high-efficiency solar modules.

The govt’s EV30@30 campaign aims to speed up deployment and achieve 30% sales share for electric vehicles (EVs) by 2030. It will also help reduce the import of expensive crude oil. The Centre will introduce an extensive battery swapping policy to promote the sale of EVs. Moreover, special mobility zones for EVs will be established in urban areas.

Sovereign Green Bonds (SGBs) will be issued to mobilize resources for green infrastructure. The proceeds from the issue of these bonds will be deployed in public sector projects that will help reduce carbon emissions in the economy. It will also support the wider adoption of solar and other renewable energy sources across India. SGBs will be part of the government’s borrowing program in FY23.

Stocks That May Benefit:

Stocks in the EV and green energy space will benefit the most from these policies. Tata Motors, Tata Power, Adani Green Energy, Borosil Renewables, Tata Chemicals, Motherson Sumi, etc can be watched. Battery manufacturers such as Exide Industries and Amara Raja Batteries could also benefit.

You can also go through our detailed analysis of power distribution and transmission companies here. 

Boost for Telecom Sector

Telecom spectrum auction will be conducted in 2022 for the rollout of 5G mobile services by private telecom providers. The Centre will also launch a PLI scheme for design-led manufacturing for the 5G ecosystem to enable affordable broadband and mobile communication in rural and remote areas. 

The govt will offer contracts for laying optical fibre cables in villages under the BharatNet project under the public-private partnership (PPP) model in FY23. The project aims to bring rural access to e-services, communication facilities, and digital resources.

Bharti Airtel, HFCL, RailTel Corporation of India, Tejas Networks, Dixon Technologies, GTL Infra, Sterlite Technologies are likely to benefit.

Boost for the Defence Sector

  • The Finance Minister has stated that ~25% of the total defense R&D budget will be earmarked for opening up defence research & development (R&D) for private industry, startups, and academia. 
  • Private industries will be encouraged to take up the design and development of military platforms and equipment. They can now collaborate with DRDO and other organizations through special purpose vehicle (SPV) model. 
  • 68% of the capital procurement budget in defence will be allocated for domestic industry in 2022-23. This will give a boost to the Make in India initiative.

Stocks related to the defence sector include Hindustan Aeronautics Ltd, Bharat Dynamics, Zen Technologies, Bharat Electronics, and Paras Defence & Space.

Boost for Banking and NBFC Sectors

As per reports, HDFC Bank, ICICI Bank, and State Bank of India could be the biggest beneficiaries of the government’s push to convert more than 1.5 lakh post offices into banking outlets. These lenders could tap into nearly Rs 15 lakh crores of savings in the post offices to sell other financial products like mutual funds and insurance. 

The extension of the Emergency Credit Line Guarantee Scheme (ECLGS) to March 2023 will be beneficial for banks and non-banking financial companies (NBFCS) that focus on micro, small, and medium enterprises (MSMEs).

The Way Ahead

The Indian government continues to focus on getting the economy back on track and speeding up growth. The Budget will provide a boost to the ‘Make-in-India’ initiative by focusing on infrastructure, housing, power, railways, and agriculture. The Centre’s extended focus on digitisation through new-age technologies and electric vehicles is highly commendable. Let us look forward to seeing how these strategic plans are implemented. 

Disclaimer: The stocks mentioned in the article are solely for educational purposes. Please do your own research before investing.

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Editorial

Why You Should Look Into Switch Delhi Campaign for Electric Vehicles

It’s no secret that many northern states of India lead the chart of the most polluted cities in the world. Delhi and the NCR region (Noida, Greater Noida, Faridabad and others) becomes a gas chamber during the winter season. AQI index is an index which measures how polluted the air of that place is. The value of index ranges from 0 to 500. Refer to the table below.

Levels of ConcernValues of Index
Good0 to 50
Moderate51 to 100
Unhealthy for Sensitive Groups101 to 150
Unhealthy151 to 200
Very Unhealthy201 to 300
Hazardous301 and higher

As you can see AQI index above 301 is termed as ‘hazardous’. If we elaborate, this index number means ‘Health warning of emergency conditions: everyone is more likely to be affected.’ You would be surprised to know that for many days, this index goes to as high as 500 and even surpasses that level during the morning and evening time. Last year, the situation was so bad that the Delhi government had to shut down schools and colleges and request everyone to stay home for a few days. 

Due to Covid-19 pandemic, the world was forced to wear a mask on their faces. But this practice was not new to the Delhites. They have been covering their faces with a mask for the last 2-3 years during the winter season. There are many reasons why the national capital becomes a gas chamber and pollution coming out from vehicles is one of those reasons.

“Switch Delhi” campaign begins

Switch Delhi is an electric vehicle mass awareness campaign started by the state government of Delhi. It aims to increase awareness about the needs of electric vehicles due to current pollution level. The Delhi Government aims to have at least 5 lakh electric vehicles by 2024, that is, at least 25% of the total vehicles in the state. This is a massive target because this number stands at a mere 0.2% (as of August 2020).

https://twitter.com/CMODelhi/status/1357284198684393473

With this policy, the Delhi government has declared that they want delivery companies like food delivery and e-commerce logistics providers to shift to 50% of their fleet to electric by March 2023. Also, they want this to extend to 100% of all the vehicles by March 2025. 

To monitor the implementation and progress of this policy, an electric vehicle board will be formed within the transport department. On top of it, recently the Delhi government announced that all the cars hired by them will be an electric vehicle in the next six months. On 5th February, they floated India’s biggest tender for EV charging. In this tender, they have laid out the plan to build 500 charging points at 100 locations in Delhi.

Attracting Incentives

As humans, we have a tendency to go behind offers. Whenever we see a discount, we favour going towards that product rather than a similar product without discount. This is one of the best ways you market the goods or service you have. The government of Delhi knew that to make people change their habit, they have to roll out incentives. And, not only incentives but also some financial incentives. 

You would be happier when you receive Rs 100 cashback from Paytm rather than Rs 100 off on some shopping. Similar is the case here. With the new EV policy, they have kept in mind that their main aim is to generate higher demand. This demand will be created when people are incentivised to come forward and switch to EVs in mass number. Here is what the state government is offering to the people of Delhi.

  • The financial incentive of up to Rs 30,000 on battery-powered two-wheelers, autos and e-rickshaws.
  • The financial incentive of up to Rs 1.5 lakh for new electric cars in the state.
  • A waiver of the registration fee and road tax.
  • A purchase incentive of Rs 10,000 per kWh of battery capacity for first 1,000 cars subject to a cap of Rs 1,50,000 per vehicle.
  • A scrapping incentive of up to Rs 5,000 for leaving old cars and switching to EVs.
  • Mandatory for new home and workplace parking to reserve 20% of parking for electric vehicles.
  • 100% subsidy for the purchase of charging equipment costing up to Rs 6,000 per unit. This benefit will be provided to the first 30,000 charging points at homes and workplaces.

Why This Helps You

The government came out with the initial announcement of its new EV policy in August last year. Since then, 6,000 new EVs have already been added on its roads. Waiving the road tax and registration fees is a big decision. 

With this announcement, every stock catering to the Electric Vehicle segment should rally. And more than just short term, these stocks have the potential to be wealth creators in the long run. You can look into these battery stocks, along with power distribution companies and many many more.

The road tax levied on vehicles generally ranges from 4% to 10% of the cost of the vehicle. The registration fees could cost up to Rs 3,000. Thus, all these are reducing the charge which one will occur if they purchase petrol or a diesel car. All these are the areas where the government earns money. They are cutting off on their income so that people can be attracted towards EVs. 

The efforts show that Delhi is serious about leading India’s shift to Electric Vehicles. As the demand for these EVs is created, companies will come up with new products in their portfolio. The rising pollution level in the capital of the nation is hazardous and life-threatening. Yes, the pollution level won’t be decreased fully but a switch to EVs will surely have a massive effort.

Being a Delhite myself, I feel this is a very important step to promote Electric vehicles. Let’s hope that this model becomes successful so that it can be implemented nation-wide. Until, next time.