Budget 2019 – Key Sectors & Themes to Invest In

The BJP government’s last budget before the coming general elections brought a lot of joy to farmers, salaried class and the real estate sector. The interim budget presented on last Friday is also expected to be positive for multiple smallcases. Let’s take a look at some of the biggest gainers.

Boost to rural India

Aimed at improving rural economy, Finance Minister Piyush Goyal announced a relief package of ₹75,000 crore under a new scheme called Pradhan Mantri Kisan Samman Nidhi. As part of the package, the government will transfer a sum of ₹6,000 per year to farmers who own up to 2 hectares of land. ₹20,000 crore will be spent on the scheme during the current fiscal year, before 31st March 2019.

While the Government spent ₹61,084 crore on MNREGA program during the 2018-19 period, substantially higher than the budget allocation of ₹55,000 crore, ₹60,000 crore has been allocated for the 2019-20 period. Click To Tweet

To encourage animal husbandry and fisheries activities, a 2% interest subvention for farmers pursuing the same has also been announced. The government has also decided to create a separate Department of Fisheries.

Allocation to other programs targeting irrigation, rural roads, crop insurance, and interest subvention & minimum support price have all been increased.

The Rising Rural Demand smallcase has companies that either derive a significant amount of their revenue from rural India or are striving to enhance their foothold across rural markets to benefit from increasing rural demand. The smallcase is best suited for investors looking to benefit from increased rural spending by the government.

Big win for real estate sector

In an effort to push the Prime Minister’s housing-for-all initiative, the government has announced a whole set of tax reforms for the realty sector.

Prime Minister Narendra Modi’s flagship scheme, the Pradhan Mantri Awas Yojana or PMAY, has received an allocation of ₹25,853 crore. Click To Tweet

The government earlier this week had approved over 4 lakh houses under its Pradhan Mantri Awas Yojana (Urban), taking the total number of houses sanctioned under the scheme to over 72.5 lakh.

The benefit of rollover of capital gains under section 54 of the Income Tax Act has also been increased from investment in one residential house to two residential houses for a taxpayer having capital gains of up to 2 crores.

Tax Deducted at Source threshold for deduction of tax on rent has also been increased from ₹1,80,000 to ₹2,40,000, providing relief to small taxpayers. Notional rent on a second self-occupied house has also been exempted from income tax.

The Realty Tracker smallcase comprises real estate companies to allow investors to efficiently track and invest in the realty sector.

Emphasis on infrastructure

In order to boost the country’s physical infrastructure, ₹82,571 crore has been allocated towards building roads, a ₹4,344 increase from the current fiscal year expenditure.

₹550 crore will be expended towards Sagarmala project - an initiative to modernize India's Ports. Allocation to metro projects has been increased by 19% to ₹17,714 crore, up from ₹14,865 expected to be spent this year. Click To Tweet

The Infra Tracker smallcase comprises construction & engineering, water management, cables, ports, and cement companies to allow investors to efficiently track and invest in the infra sector.

Towards a smart India

₹12,569 crore is budgeted to be spent on the Smart Cities Mission during the current fiscal year 2018-19. This is a 33% increase from the ₹9463 crore spent during the 2017-18 period. The allocation has been increased by 10.6% to ₹13,900 crore for the 2019-20 period.

Allocation for the Smart Cities Mission has been increased by 10.6% to ₹13,900 crore for the 2019-20 period. Click To Tweet

The Smart Cities smallcase consists of companies expected to benefit from GOI’s flagship Smart Cities Mission.

Markets update

After Finance Minister Piyush Goyal announced sops for rural India during interim budget 2019-20, benchmark indices closed in the green last week. Nifty closed up 1.05% at 10,893.7 and Sensex closed up 1.23% at 36,469.4.

Infrastructure output during December 2018 grew by 2.6% compared to the same period in the previous year. Nikkei Manufacturing PMI for January 2019 increased to 53.9 from 53 last month, suggesting increased factory output.