👍Capex push, tax rationalisation: Brokerages give a thumbs-up to Budget 2023 | Business Standard News

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Our equity strategists view the budget as positive for infrastructure and capex-sensitive sectors, says Goldman Sachs

Capex push, tax rationalisation: Brokerages give a thumbs-up to Budget 2023

Brokerages have given a thumbs up to the Budget 2023 proposals, which they said is a reiteration of the key tenets of the government. Capex push, rationalisation of taxes, especially the personal income-tax and the status quo on tax treatment for sale of investible securities has been applauded. Here is a compilation of how leading brokerages and research houses have interpreted the proposals; and the sectors & stocks they are bullish on in this backdrop.

Goldman Sachs

The budget ticked all essential macro-prudential boxes. Tax assumptions seem realistic, with modest assumptions on tax buoyancy. The RBI may have to resume supporting government bond purchases in the second half of FY24. Our equity strategists view the budget as positive for infrastructure and capex-sensitive sectors, given the large capex outlays in the budgets. Our sector analysts also think that the budget is positive for industrials and infrastructure.

ALSO READ: Union Budget 2023-24: Firm on prudence, high on feel-good factor

The budget is a reiteration of the key tenets of the government – 50 basis point (bps) fiscal consolidation for FY24, proposed adjusted capex growth of 24 per cent came at the cost of only 2 per cent non-capex expenditure growth in a pre-election year. But these things can change during the course of the year as happened in FY23. FY23 capex growth was 8 per cent against 14 per cent budgeted. ITC, Larsen & Toubro (L&T) and capex plays, pipe companies should witness a positive impact. Incremental negative for insurance and oil marketing companies (OMCs).


The broader push towards infrastructure, agriculture, manufacturing and tax rationalisation are consistent with the direction chosen over the last few years. We think the budget numbers are overly optimistic. Expect growth to slow materially in FY24, owing to a mix of DM recessions and the lagged impact of tighter monetary policy, with real GDP growth at 5.1 per cent y-o-y in FY24 and nominal GDP growth at around 8.5-9 per cent. The resulting lower nominal GDP growth means tax revenues are likely to disappoint.

ALSO READ: From automotive to telecom, here’s how the Budget affects key sectors

The big push on public capex is more than expected, but shows that the government does not believe private capex is durably picking up yet, which is an assessment we agree with. The market was more cautious going into this year’s budget, so the more market-friendly borrowing number should be supportive for the bond market.

Morgan Stanley

The sharp increase in capital spending, credible fiscal consolidation, no change in capital gains tax regime for equities, lower-than-expected market borrowings, and a likely shift in the RBI stance augur well for stocks. This Budget probably means the consensus may need to raise earnings estimates – we remain 10 per cent ahead of the consensus EPS on the BSE Sensex. Our overweight sectors: Financials, Discretionary Consumption and Industrials. We remain underweight on global sectors and defensives, except technology.


An important take away from the budget for the market is reduction of personal income tax. This increases disposable income, a positive for consumption. UBS has Buy ratings on HUL and Asian Paints. Increased outlay for PM Awas yojana is a positive for home improvement companies.


The key question facing the bond market will likely be whether banks will be as willing to buy g-secs in FY24 as they were in FY23, especially in credit growth moderates. There have been calls for RBI OMO purchases, but we believe that would only come forth if the BoP were to see a meaningful deficit that sucks out rupee liquidity.

Motilal Oswal Securities

It was a relief to see the government resisting populism pressures. At the same time, neither the aggregate capex growth nor the tweaks in taxation is likely to make a big difference. With a 5.9 per cent budgeted deficit estimated in FY24, the task of bringing it down to 4.5 per cent of GDP becomes even more challenging. It is possible only and only if the government keeps its spending growth extremely muted for the subsequent two years, thus restricting its ability to support economic growth.

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