Top Stock Picks By Axis Securities Post Budget 2022 Analysis

Following the announcement of the Union Budget 2022-23, brokerage company Axis Securities feels that this budget is a growth-focused budget that correctly emphasises the efficiency of expenditure while attaining solid economic development. The brokerage stated in a research report that "The FY23 Union Budget focused on the Gati Shakti Mission through which the government plans to provide significant thrust to the infrastructure development. This includes impetus to the Roads, Railways, Airways, Ports, Mass Transports, Waterways, and Logistics Infra development. The government increased the headline budgeted Capex by 35% but adjusting for certain expenses, the expenditure growth will be in the healthy double digits. The key sectors expected to benefit from Capex are Cement, Infrastructure companies, Metals, and Capital Goods. The Cement sector should see improving traction as budgetary support will come from infrastructure spending as well as housing spending."

The brokerage is neutral in the consumption and auto sector and hence reported that "While the emphasis on Electric Vehicles continued, no significant announcements were made for the Auto sector. The PLI schemes continue and we expect more announcements in this space at regular intervals as this continues to be the government's one of key focus areas. However, no major increase in rural allocation or tax rebates was a dampener for the consumption sector. Nonetheless, the focus on job creation and improving infrastructure will support the growth prospects and fuel future growth in overall consumption."

Brokerage, on the other hand, is bullish in the banking sector and has highlighted that "The support for MSME and SME has been extended into FY23 with an increased allocation of Rs 50,000 Cr to the Hospitality sector. Additionally, affordable housing lending is expected to rise. The increase in Capex spending will also support banks in improving credit growth. While these are positive attributes, primarily due to an excellent nominal growth rate in FY23, the cost of funds of the banks is likely to increase. The bonds, on the other hand, will rise and remain in the ~7% zone for FY23. This is manageable for banks and might even be helpful as the margins can expand."

Based on the conclusion, the brokerage picks Federal Bank, City Union Bank, CanFin homes, Polycab, Ambuja Cement, KNR Construction, HG Infra, Asian Paints and ABFRL, Hindalco as its top picks post-budget declaration.

Axis Securities has also noted that "Extension of the ECLGS scheme and other measures for the MSME segment is positive for the overall banking sector, especially for midsized MSME lenders such as City Union, Federal Bank, and DCB Bank, among others. Amendments in the IBC process will speed up NPA resolutions. Hence positive for all banks, especially for the PSU banks. An increase in capital outlay should boost credit growth in the Banking sector. Positive for the entire Banking sector. No announcement on PSB privatization is marginally negative for PSU Banks, especially the lower tier PSBs. Expectations of LIC IPO in the near term may boost Demat account openings which will be positive for stocks such as CDSL."

According to the brokerage "Higher budgetary allocation towards construction and infrastructure (60% of steel demand) is positive for metal companies. An increase in capital expenditure by 35% YoY to 7.5 Lc Cr and specifical housing for all (PMA) Capex of Rs 48,000Cr and National Rural Drinking Water Mission Capex of Rs 60,000Cr for FY23 will be positive for metals demand. • Positive for Steel and Aluminium companies as domestic demand will continue in line with the higher infrastructure and housing Capex."