Stocks to watch ahead of Union Budget 2025; investor strategy & more

In its Union Budget 2025 preview note, Nuvama said the government is likely to target fiscal deficit at 4.5 per cent of GDP against 4.9 per cent for the ongoing financial year, which could reinforce policy credibility, but render fiscal stance pro-cyclical. It noted that a slower economy would weigh on taxes, leaving little space for a spending boost, thereby reinforcing the slowdown.

"Absent a big disinvestment push, any sops to HH (transfers/tax cuts) may impinge on public capex, wherein the best may now be behind. For markets, fiscal prudence is welcome, but slower capex could be a dampener. Hence, for 2025, value lies in quality," the brokerage said.

For the Budget, the likely measures beyond the fiscal math that stock investors would follow include relaxation in income tax slabs or higher deduction limit for housing loan interest to support HH demand. Investors would also expect expansion in the PLI scheme, with rationalising of inverted duty structure to bolster manufacturing. Besides, it would be watched whether there are extension or offering of alternative benefits for start-ups and IFSC businesses. Discussions on implementing a direct tax code would also be keenly watched, Nuvama said.

"As regards markets, with fiscal policy constrained in terms of demand boost, investors’ anchoring could be more to incoming earnings, domestic monetary/liquidity situation and global developments. Investors should brace for volatility, and we maintain defensive bias in our portfolio," Nuvama said.

Budget 2025: Stocks to watch

In the auto sector, the market is looking for continued support for EV OEMs by simplifying GST refund procedure for manufacturers. Currently, EVs have lower GST rate than major inputs, and EV OEMs have to claim refund, leading to blocking of working capital. There are also hopes for reduction of GST on hybrid vehicles and reduction of GST on CNG two wheelers. Nuvama sees no change in any of these procedures.

"If incremental positive announcements happen, it would lead to enhanced cash flow due to reduced blocking of working capital; would augur well for companies that are aggressively working on E-mobility such as Tata Motors Ltd, M&M, Maruti Suzuki India Ltd, Hyundai Motor Ltd, TVS Motor Ltd, Bajaj Auto Ltd, Ashok Leyland Ltd and Ola Electric Mobility Ltd," it said.

If GST on hybrid vehicles is reduced, it would be positive for Maruti Suzuki India Ltd. If GST is reduced on CNG two-wheelers, it is seen positive for Bajaj Auto and TVS Motor.

In the paints sector, Nuvama sees further clarity and higher investments in Housing for All initiative. It sees budgets for Smart Cities to be increased post relaxation in built-up area and FDI requirement. It would be positive for paint companies such as Asian Paints Ltd and Berger Paints Ltd along with Pidilite Industries Ltd.

Nuvama said higher outlay for roads, railways and a roadmap for higher rolling stock procurement in railways are all likely. It would be positive for rolling stock players such as Titagarh Wagons Ltd and Texmaco Rail & Engineering Ltd.

In the case of railways, Nuvama forecast 15–20 per cent YoY growth in capex outlay as focus shifts to rolling stock, safety, new tracks laying, etc over coming years against electrification in last decade.

"We could see some delay in large-ticket size orders opening for private sector as Indian Railways continues to do the bulk manufacturing inhouse (budget growth or components beneficiaries unaffected). Safety/Kavach allocation to positively surprise, in our view," it said.

In the oil & gas sector, given crude oil prices are once again rising above $75 a barrel level, it is possible that windfall tax might be reintroduced. If so, it would be negative for ONGC.

In the defence sector, Nuvama expects defence capex to increase by 7–8 per cent YoY with higher allocation towards R&D, UAV/drones, anti-drone systems, etc as some key large programmes in the pipeline (QRSAM, P-75I, LCA Mark1A, Pinaka, etc) are likely to materialise, skewed towards Air Force and Navy.

"Recent stock price correction across defence pack is a chance to make a lunge given a mounting growth story over and above the already known ambitious targets of GoI of Rs 50,000 crore in defence exports and Rs 3 lakh crore in defence production by 2030. We particularly prefer the subsegment Defence Electronics," it said.

Capital goods stocks to be in focus given Nuvama expects 10–12 per cent YoY growth in overall capex budget outlay for FY26BE.

A likely broadening of Ayushman Bharat scheme is seen as negative for private hospitals as they may be forced to treat patients at lower prices, thus affecting their ARPOBs and in turn profitability. Any reduction of GST on health insurance products for senior citizens and low sum insured would be positive for general insurance companies, Nuvama said.

Meanwhile, Nuvama said fertiliser subsidy would be at par with previous year. It sees the subsidy in Rs 1.5-1.7 lakh crore level, which is seen neutral for the market. Owing to crop losses due to erratic weather last year, crop insurance can see a higher allocation. The market wish list includes allocating of Rs 1.5 lakh to agriculture ministry to continue PM KISAN and insurance schemes. Its impact would be positive, Nuvama said.