Union finance minister Nirmala Sitharaman will present the first full union budget of Modi 2.0 government on February 1, which is expected to be focused on stimulating growth and boost consumption in the slowing economy.

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Analysts expect the union budget 2020 to provide stimulus to revive the economy along with a cut in personal income tax rates to spur demand.

According to a report by Antique Stock Broking, the government may also reduce or abolish long term capital tax which may significantly improve investor sentiments, resulting in further re-rating of the entire Indian equity market.

Any disappointment could lead to a 5-10 percent correction in the overall market, it said. The report lists out the key expectations from the budget and carious stocks benefiting from it.

Antique Broking expects the budget to extend the existing tax rebate of Rs 12,500 to taxpayers having an income up to Rs 10 lakh which may accelerate earnings largely led by higher volume growth for all consumption linked stocks.

It also expects the budget to increase income tax deduction on investments made (80C) or provide deductions on housing loan.

"We expect increased allocation to various rural centric schemes, along with strong Rabi season may help revive rural demand. These measures if announced may accelerate earnings largely led by higher volume growth for all consumption linked stocks,” the report said.

Likely beneficiaries from these measures may be Mahindra & Mahindra, TVS Motors, Bajaj Auto, Hindustan Unilever, Colgate, Dabur and Avenue Supermarts.

Further, the real estate may receive a boost as it is expected that the government may take incremental steps to revive the sector by expanding the definition of affordable housing, providing higher income tax deduction and improving liquidity.

Real estate stocks such as Sobha and Phoenix Mill and ancillary plays like Ultratech Cement, Kajaria Ceramics and Crompton Consumer, Voltas and Asian Paints will benefit the most from likely reforms in the real estate sector.

The brokerage expects a reduction in dividend distribution tax in the upcoming budget in order to reduce the cost of capital. This will be positive for cash-rich companies or high dividend payout companies like Infosys, Tata Consultancy Services (TCS), Oil & Natural Gas Corporation (ONGC), Indian Oil Corporation Ltd (IOCL), Bajaj Auto, Hero MotoCorp, HUL, Colgate India, Nestle, Hindustan Zinc, NMDC and NALCO.

Moreover, any labour reforms announced in the budget will be positive for all staffing companies like Teamlease. The brokerage believes any cut in long term capital gain tax may lead to further re-rating in the overall equity market.

First Published:Jan 21, 2020 3:47 PM IST