National rural Employment Scheme will create many more jobs in rural India. Thus FMCG companies are bound to benefit from this scheme. But this is factored in their stock prices.
Two wheeler motor cycle companies are also bound to gain from this move. I am more bullish on Bajaj Auto than Hero-Honda as the sales of auto-rickshaw are bound to go up, to supplement the agricultural income.
Rural population spends about 10% on alcohol consumption. Therefore, I would recommend United Breweries Ltd. as the presence of Kingfisher beer in rural areas is unmatched by any other brand. Morever, young urban population is moving out of the belief that ‘alcohol is bad’ and spending on alcohol is on the rise. And alcohol market is growing by leaps and bounds, so this is a very attractive buy with a long term view.
Banking Sector : As I had mentioned earlier, Rs. 1500 savings from tax is not going to alter the expenditure pattern in a drastic way. I believe, large portion of that money would be in the saving accounts of individuals. Assuming that even 30-40 % of that money is in saving accounts, the cumulative effect will be very large. So, the banks like SBI and ICICI are to gain from this as these two lead in retail and consumer banking fields. Also, as demand for infrastructure spending increases, demand for credit will increase. Take-away financing proposed by government is set to aid the banking sector.
Agreed, PSU banks are set to lose on treasury profits, but a small boost like higher divestment is enough for markets to be bullish on banking stocks. More importantly, as economy starts recovering, banking stocks would be the first ones to rise.
As there would be downward pressure on rupee due to large fiscal deficit, IT companies will have inflated profits in rupee terms as they earn most of their revenues in dollars. Also, abolition of FBT and excise duties exemtion is set to benefit this sector. Government spending on biometric projects for BPL families and unique identity cards will help. I will recommend TCS as Infosys and Wipro are set to lose on government ruling on tax holidays for units which are outside SEZ.
Since infrastructure spending has been increased, steel and cement sector would be feeling good. SAIL is the company I am looking forward to. One more thing is, it is one of the companies considered for divestment and if not soon, surely in future it will be in for divestment. Thus, I am looking forward to this stock.
Since evryone is after infrastructure stocks these days with a negetive outlook towards banking sector, i feel with some more correction banking stocks will be attractive buys as infrastructure companies are over-valued or to say not under-valued.
I am very optimistic even about United Breweries.
I personally feel that following the herd will never give very good returns. Cheers !!
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