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The Union Budget 2025-26, largely aligned with expectations, prioritized inclusive growth by focusing on key sectors such as the poor, youth, middle class, farmers, MSMEs, exports, and women. The budget aims to achieve transformative changes across taxation, power, urban development, mining, financial, and regulatory reforms. SBI Securities, in a recent report, highlighted the budget's consumption-oriented approach, designed to stimulate economic activity while maintaining fiscal responsibility. A significant aspect was the announcement of no income tax on income up to ₹12 lakh under the new tax regime, a move anticipated to significantly boost consumption, which has been lagging in recent quarters. This ₹1 lakh crore stimulus is projected to reinvigorate the economy through increased consumption and savings. The tax cuts could also encourage retirees and pension earners to allocate more savings into fixed deposits, potentially benefiting banks in the medium to long term. The report anticipates further government reforms, including a new income tax bill, further boosting various sectors.
Beyond the immediate impact of the budget, SBI Securities forecasts long-term benefits for several sectors. The auto, auto ancillary, realty, FMCG, healthcare, renewables, railways, defense, ERW pipe makers, and select banks and NBFCs are expected to experience positive growth. SBI Securities has identified five stocks as particularly promising investments with a 12-month horizon. ITC, with its well-positioned cigarette business, improved product mix, and strategic cost management, is predicted to see volume growth. The demerger of ITC's hotel business will further enhance return on capital employed (RoCE) and cash flows. Their FMCG segment is expected to perform steadily despite inflationary pressures. The target price for ITC is set at ₹530, representing a 15% upside.
Bajaj Finance, a retail lender, stands to benefit from the increased consumption spurred by the tax cuts. Its strong presence in discretionary segments, such as two-wheeler and three-wheeler auto loans, B2C loans, and consumer electronics financing, is expected to fuel AUM growth. Lower credit costs and operational efficiencies should enhance the return on assets (RoA). SBI Securities notes that Bajaj Finance’s P/B multiple is 5.4x/4.5x for FY25E/FY26E based on consensus estimates. The target price is set at ₹9,037, indicating a 13% potential upside. IndiGo, benefiting from competitors' disruptions and its robust low-cost operating model, has witnessed substantial market share growth, rising from 55% in March 2022 to 64% in December 2024. The expansion of Indian aviation, supported by new airport developments, presents significant growth opportunities for IndiGo. The income tax cuts will further boost disposable income, stimulating demand in the aviation sector. The target price for IndiGo is ₹5,200, with a projected 16% upside.
The Indian Hotels Company (IHCL), with its commanding market premium and ambitious expansion plans under the Accelerate 2030 strategy, is another promising stock. Aiming to expand its portfolio to over 700 hotels by 2030 while improving margins and achieving a 20%+ RoCE, IHCL has showcased strong financial performance, with significant year-on-year revenue, EBITDA, and PAT growth. The substantial increase in hotel signings further supports its growth potential. The target price is ₹905, with a 13% potential upside. Brigade Enterprises (BEL), with its diversified portfolio encompassing residential, office, SEZ, retail, hospitality, and senior living assets, shows robust growth across pre-sales, collections, sales volume, and average price realisation. Its extensive land bank and upcoming projects ensure strong revenue visibility. The target price is set at ₹1,335, offering a 15% potential upside. In conclusion, SBI Securities’ post-budget analysis suggests a positive outlook for the Indian economy and identifies several promising stocks across various sectors poised for growth in the coming year.
It's important to note that these are just recommendations from one brokerage firm, and investment decisions should be based on thorough individual research and consideration of risk tolerance. Market conditions are dynamic, and past performance is not indicative of future results. Investors should consult with a financial advisor before making any investment decisions.
Source: ITC, IndiGo to Bajaj Finance: SBI Securities picks 5 stocks to buy after Budget 2025