Here are a few stocks that could be in action ahead of the Union Budget 2017-18. One needs to be careful though, given the fact that if the Union Budget disappoints, we could see some selling pressure in these stocks. We wish to emphasize that these are all speculative as nobody would know what the Union Budgetary recommendations would be: Hence, you need to be careful before taking long positions.
It is widely believed that this year as well there could be some tax sops for those who take a housing finance loan. Presently, the principal amount qualifies for tax rebate under sec 80 and the interest income on housing loan gets a tax rebate of Rs 2.5 lakhs. Whether there would be an exemption one cannot say with certainty. The IndiaBulls Housing Finance stock has already rallied a great deal based on these hopes.
Consumer discretionary stocks are also likely to rally based on the assumption that the Finance minister would hike the tax slabs in the forthcoming Union Budget. If that happens the logic is that two-wheelers would benefit as disposable income is higher. Among the stocks that would benefit is Hero MotorCorp, which is the largest two-wheeler maker in India.
As far as the fundamentals are concerned the stock is not too expensively priced at around 18 times one year forward p/e. Check stock quote of HeroMotor here
LIC Housing Finance
This is another stock that has rallied in the past few days. The stock may once again be active and volatile ahead of the Union Budget on the same parameters based on what we suggested for IndiaBulls Housing Finance. How far it goes from here is difficult to say. However, if there are no recommendations in the Union Budget for the housing finance sector, we could see some selling in these stocks.
Bajaj Auto is another stock that would benefit, if either tax slabs are raised or there are some massive tax exemption in this Union Budget for the common man. Again, by the same logic and belief that a rise in disposable income would be good for these two-wheeler makers. New launches from this major, coupled with a rapid expansion are other positives, that make the stock a good bet at the current levels.
Maruti is another share that will benefit from a hike in the tax slabs or tax benefits that consumers get, as disposable income remains higher. Watch for the stock of Maruti ahead of the Union Budget 2017. In any case, the stock is also a great fundamental stock idea as well. Of course there is unlikely to be any increase or decreased in the excise of small cars with the implementation of GST.
Dewan Housing Finance
Shares in Dewan Housing Finance may also see a good rally, ahead of the Union Budget on hopes that interest on income tax exemption limit for home loans would be raised. Housing Finance companies have been performing well, thanks to an almost 20 per cent growth that these companies have been seeing. If the sops do not come, we would see some selling pressure in these stocks.
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