Budget 2025: Sharekhan expects tax cut; Titan, Indian Hotels among stock picks

The upcoming Union Budget on February 1 is likely to include several proposals, which can put economic growth on fast track. However, the government will also have to walk the tight-rope between fiscal disclipline and its ambitious growth agenda. 

Brokerage Sharekhan has listed out several steps in its Union Budget preview the government is likely to take in the next fiscal. 

Capex to moderate

Government capex, which tripled over FY21 to FY24 to 3.2% of GDP in FY25, is likely to stabilise at this level for FY26 as fiscal consolidation takes priority.

Employment generation and boosting consumption

To boost employment and consumption, the government is likely to announce measures such as enhanced MSME credit and stimulus for job-creating sectors like textiles, garments, and chemicals, leveraging the “China+1” opportunity.

Fiscal deficit target on track

The FY25 target of 4.9% is achievable due to robust income tax collections and higher
dividends from RBI and PSUs, despite slower nominal GDP growth.

Tax reforms likely

Budget 2025 may introduce phased income tax modernisation, focusing on reducing rates, rationalising exemptions, and easing compliance; Direct Tax Code overhaul unlikely at this stage. Any changes in capital gains regime would not be taken favourably after the realignment done last year.

Focused on growth: Large-caps preferred vs SMIDs

Overall, we are constructive on equities and prefer large caps relative to SMID on better risk-reward. We are overweight on key sectors such as financials, IT, pharma, real estate, capital goods and selective positive on Industrial and speciality chemicals space.

The brokerage listed out its Budget preview picks. 

Infrastructure and Power: L&T, APL Apollo, Ultratech, NTPC

Capital Goods and Defence: BEL, HAL, ISGEC Ltd, KEC Ltd

Discretionary Consumption: Titan, Indian Hotels, Lemon Tree,  Himatsingka

Real Estate: Macrotech, DLF, Suntech Realty

Financials: SBI, PNB Housing, ICICI Lombard, ICICI Bank, HUDCO

Public digital infrastructure: Bharti Airtel, Protean e-Gov