Prabhudas Lilladher said that 2021 Budget continued from where we left last year. Higher allocation for Infra push, social spending and healthcare are positive. No TDS on REIT and Invit and FDI in Insurance. A big Infra push with 26% higher capex. No major taxes on individuals and corporates have been positive. Fiscal deficit for FY21 at 9.5% has been higher and 6.8% for FY22.  PSU divestment has been pushed with 2 banks and 1 Insurance company at the forefront with all but 4 strategic sectors to be privatized. Overall the budget is positive for pushing growth in the economy.

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Macro Highlights:

No change in corporate and Personal Income taxes
Fiscal deficit at 9.5%, target of 6.8% in FY22 and 4% by 2026
Actual expenditure increase of just 1% in FY22 with 26% increase in Capex
Divestment of 2 PSU banks and 1 Insurance company, target at Rs175000 crore, IPO of LIC
Lower import duty on Gold and Silver from 12.5% to 7.5%
10% growth in Agri credit at 16.5 lakh crores

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Agriculture Sector:

FY22 budgeted fertiliser subsidy Rs 80000 crs. FY21 revised subsidy Rs 134793 crs is positive for fertiliser companies. Caprolactam reduction in custom duty & Nylon 6 is negative for GSFC. Agri Credit target increased to Rs 16.5 lakh crs. Agri infra and development cess on various sectors- Positive for Agriculture Sector.Custom duty up on cotton is positive for Agriculture sector.

Automobiles Sector:

Scrappage policy – The budget has proposed a voluntary scrappage for commercial vehicles (>15 years) and other vehicles (>20 years). While details on incentive benefits and scrap infrastructure awaited, a mandatory scrappage would have resulted in to demand creation especially for the commercial vehicle segment. However, Prabhudas Lilladher believes underlying CV recovery should benefit pure play CV stocks like Ashok Leyland.

Indirect benefits due to focus on agri and rural infrastructure will enhance agriculture credit target, MSP and infra focus should help companies like M&M, HMCL, Maruti and Ashok Leyland.

Oil & Gas Sector:

Independent gas transport operator for common carrier capacity – already was clarified by the regulator. This will ensure uniform pipeline access to all customers. This news is neutral for GAIL. Plan to transfer pipeline assets of GAIL, IOC, HPCL to an INVIT will help provide a valuation benchmark that is positive for GAIL.