This was quite visible in the Cabinet allocation, wherein the BJP retained most of the high-profile departments with their ministers.
During the past decade, the BJP has very carefully created an image of a clean government, minimizing wasteful spending and corruption, making the Budget more transparent by reducing off-budget expenditure/borrowings leading to higher capex allocation, resisting calls for large rural support, and maintaining fiscal prudence.
We strongly believe (and hope) that there will not be substantial changes in its mindset/philosophy, creating policy continuity. Coalition politics, however, could make it more challenging to pass legislation on the more ambitious parts of the government reform agenda in areas like agriculture, land, labor and judicial, which are usually out of Budgets.
We believe that the new government will largely retain its tax and non-debt capital receipt projections as presented during the Interim Budget in Febβ24. If so, a transfer of Rs 2.11 trillion by the RBI implies excess receipts of about Rs 1.5 trillion in FY25.A large part of these additional receipts, we believe, would be spent under various heads, while a small portion could be used to reduce the fiscal deficit. Rs 300-400 billion could be utilized to reduce the fiscal deficit to 5% of GDP, from the 5.1% of GDP announced in the Interim Budget.One of the ways to spend additional resources could be to provide more capex-related loans to states, which would also make the Centerβs total capital spending (including loans & advances) look better.Moreover, the Center budgeted INR1.4t to states and UTs as loans & advances in FY25 in the Interim Budget, which could be increased by INR300-400b.
Similarly, if the government decides to revise the installments under PM-KISAN by 50% to Rs 9,000 per annum, it would entail the cost of another Rs 300 billion to the exchequer.
The remaining Rs 500 billion could be used by the Union Government to provide some more incentives to the taxpayers to shift to the new tax regime and to expand on housing schemes or various other schemes.
Overall, we do not expect the government to divert from its fiscal deficit consolidation path while improving the quality of fiscal spending.
It is, however, very likely that fiscal spending could be increased (vs. Febβ24 budget), due to higher receipts led by the RBI dividend.
BEL: Buy| Target Rs 360
BHEβs 4QFY24 results beat our estimates, driven by better-than-expected EBITDA margin and PAT and strong revenue growth. Up-fronting of order inflows led to a beat in overall order inflows for the company.
We expect BHE to be a key beneficiary of increasing defense indigenization. The share of indigenization in the Indian defense sector has been continuously moving up and we expect BHEβs revenue market share to remain high at around 12-13%.
The company is continuously taking initiatives to increase the share of exports and non-defense revenues.
PNB Housing Finance: Buy| Target Rs 1015
PNBHF is well equipped to successfully navigate near-term headwinds in NIM, and further offset them with product mix improvements.
Subtle changes like moving away from higher-ticket housing and LAP loans to more granular ticket sizes, focusing more on non-metros, and expanding into Tier 3 and Tier 4 cities for better growth and yields in affordable housing will help PNBHF deliver healthy growth and improvement in profitability.
We expect the company to deliver a healthy ~18% CAGR in loans and ~23% CAGR in PAT over FY24-26, with RoA/RoE of 2.4%/13.0% by FY26.
(The author is Head β Retail Research, Motilal Oswal Financial Services Limited)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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