The announcements in the Union Budget will lead to a boost in consumption-related sectors. Also, long-term government policies will be favourable for urban housing, insurance and defence industries, said smallcase. It also highlighted that from 2014-15 where capex was 20% of the total Budget, it has increased to 31% this year. Overall, capex has been growing at nearly 15% CAGR over the last 10 years compared to the revenue expenditure, which has grown at around 10% CAGR, said Vikas Gupta, smallcase Manager & Founder of OmniScience Capital.
The company also said that government’s large capex investments are likely to benefit banks, specialises infra NBFCs.
According to smallcase, other sectors that could benefit due to the tax benefits announced in the Budget are tourism, especially, religious tourism, and the IT sector. IT remains an interesting play with DeepSeek catalysing an extraordinarily large TAM (total addressable market) for Indian IT services companies. With the cost of training new AI models being brought down to 1/30th to 1/50th of the earlier paradigm, this makes it possible for small and mid-sized companies and startups to develop new models and launch numerous products based on AI in the next 2-10 years. This enlarges the market for Indian IT services manifold. However, with some uncertainty on the near-term growth rates and valuations slightly high, IT remains potentially alpha generating.
On the impact of the US President Donald Trump’s policies on the market, Gupta said, “The US tariffs on China are a big opportunity for India. At a macro level, Trump favours a weak dollar to increase competitiveness of American exports. Add to that it is challenging for the RBI to cut rates given the fall in INR, the central bank may look at other ways to boost market liquidity given INR fall, largely the street is expecting a 25-bps rate cut by the RBI this week."
Also, Arvind Kothari, smallcase Manager and Founder of Niveshaay highlighted power, transformers, and clean energy sectors are attractive investment opportunities, especially with the government’s continued focus on energy transition, infrastructure development, and sustainability. The Budget’s increased allocation towards renewable energy, grid modernization, and EV infrastructure is set to drive robust growth in these areas. He also pointed out PLI schemes have significantly accelerated the growth of textile companies by enhancing manufacturing capabilities and promoting exports.
The Budget’s focus on boosting domestic production, coupled with favourable policies, is expected to further strengthen this sector. Furthermore, he noted that the Budget’s emphasis on increasing capital expenditure and infrastructure development will have a multiplier effect on the economy, stimulating consumption and private investment. The government's push towards creating jobs, improving rural incomes, and enhancing disposable income is likely to drive robust domestic demand, creating a favourable environment for sustained economic growth.