Budget and stock markets: How Nifty may behave and 50 stock ideas

However, the post-budget rally has been significant as Nifty has given an average return of 5.7% in one month after the Budget in the last 10 years.

ETMarkets.com

In the post-Budget period, sectors like materials, industrials, staples, and energy have outperformed.

"Going into the Budget, we expect Staples & Autos (potential consumption boost) & capex facing sectors such as Mortgage/Power financiers/Industrials/Cement/Metals to benefit; we are cautious on financial intermediaries," said Amish Shah of BofA Securities.

When Finance Minister Nirmala Sitharaman presents the Budget on July 23, the new government is anticipated to increase welfare spending but not pivot entirely from its current economic policies of prudential fiscal discipline.

A section of the market is expecting the Budget to use its extra revenues to boost consumption, especially rural consumption through a combination of both personal tax cuts and redistribution.

"We think the market is likely to be disappointed on this front. Tax cuts really do not help if they happen, they are likely to be quite small and redistribution is very unlikely since it is against the BJP's policy. We believe spending will focus on infrastructure (physical and social) and, therefore, will not be a direct boost to consumption. The government has already committed itself to a larger build of homes for poor people," Morgan Stanley said.

Axis Securities expects the government to continue with the capex plan announced in the Interim Budget, pegged at Rs 11.1 lakh crore.

"Its unwavering focus on roads, power, urban development, and railways will create key long-term economic multipliers. In a significant development for the railways, the government has announced higher capital outlays of Rs 2.55 lakh crore for the segment, which will notably boost railway infrastructure moving forward. Moreover, the scope of existing PLI schemes is likely to broaden to more sectors capable of generating more employment," Axis said.

In addition to the focus on an investment-led push to the economy, measures to boost the rural economy could also be on the agenda.

"The government has already increased allocation to MNREGA by 43% in the Interim Budget. Now, it may either look to increase the installment amount under the PM Kisan Nidhi Scheme as an alternative to guaranteeing the MSP for all crops. It may also look to increase rural housing credit subsidy, provide women & child SOPs (interim relief to boost consumption), give job guarantees through various skill development schemes such as Pradhan Mantri Kaushal Vikas Yojna, giving the impression that the government is taking care of roti, kapda, makan," Sharekhan said.

Here are key stock ideas from top brokerages:

Sharekhan:
FMCG: , , , .
Auto: , , M&M, .
Infrastructure/Power/Capital Goods: , L&T, , , , , , DEE Development, Triveni Turbines, , and CESC.

Defence: HAL, BEL, Bharat Forge
Discretionary consumption and real estate: Samhi Hotels, Chalet Hotels, Wonderla Holidays, DLF, Sunteck Realty, Arvind Smart, ABDL.
Financials: SBI, Bank of India, PNB, LIC Housing, Canfin Homes, ICICI Bank, Axis Bank, HDFC Bank, ICICI Lombard.

Axis Securities:
Hero Motocorp, Ultratech Cement, Nestle, NTPC, Praj Industries, Inox Wind, J Kumar Infra, Ahluwalia Contracts, V-Mart, M&M, Power Grid, Va Tech Wabag, Bharat Electronics and Sarvotech power.

Choice Broking:
Mahindra Lifespace Developers, Bharat Dynamics Limited, Bharat Electronics Limited and Hindustan Aeronautics Limited (HAL).

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