Metal and Cement Sectors in Budget Spotlight!

As the nation eagerly awaits the unveiling of the Interim Budget for the financial year 2024-25 on February 1st, speculations and expectations are rife, particularly in this election year. The government’s economic policies have been a focal point, with a distinct emphasis on investment-led growth. Let’s delve into the expectations and projections for Budget 2024 and explore which sectors are anticipated to thrive.

Diversification in Infrastructure Spending:

Expectations are high for the government to diversify its infrastructure spending, extending beyond traditional sectors like roads and railways. Ports, shipping, sustainable energy, and urban development are poised to benefit from this strategy. The government’s commitment to transitioning from carbon-dependent to energy-efficient policies aligns with global sustainability trends.

Private Sector Investment Boost:

To supplement public sector investment, Budget 2024 is expected to introduce measures to encourage higher private sector investment. Incentives and initiatives to attract private investors may play a pivotal role in sectors where private investment has been relatively modest.

Export Growth Revitalization:

Addressing recent contractions in export growth is a key priority, and the government is anticipated to focus on boosting exports by exploring new markets and supporting growth in existing ones. This becomes crucial for economic recovery, especially given the prevailing global uncertainties.

Subsidy Rationalization and Rural Development:

While expectations are for continued subsidy rationalization to reduce the fiscal deficit, challenges such as the impact on rural demand are acknowledged. The recommendation is to redirect subsidy savings toward initiatives supporting sustainable growth in rural income, possibly through increased spending on rural infrastructure.

Government Borrowing and Fiscal Deficit:

Projections suggest that the government will target a fiscal deficit of 5.2% – 5.4% for FY25. The expected borrowing program aims to balance the need for funds with the objective of not crowding out the private sector, especially during the second half of the financial year.

Now lets us understand what are the key impacts on different sectors:

The Metals Sector Shines:

The hallmark of the government’s economic program has been its focus on investment-led growth, particularly in infrastructure projects. While there might be a pause in the current Budget, signs of a revival in government and private capex spending are evident.

The metals sector, in particular, is poised for robust growth. With the economy projected to grow at around 7 per cent, metals demand is expected to remain strong. The government’s infrastructure thrust has already bolstered steel demand, with monthly steel consumption rising by 15 per cent in April-December 2023 compared to the previous year.

India’s steel companies, having added capacity and undergone consolidation, stand to benefit from this burgeoning demand. The non-ferrous sector, including metals like aluminium and copper, is also expected to play a significant role in India’s growing economy. These metals, vital for green energy and transport transition, are projected to see a doubling in consumption in the next decade, driven by sectors like transport, industries, and urbanization.

In conclusion, the expectations for Budget 2024 outline a strategic approach to economic growth, emphasizing diversification, private sector involvement, export promotion, and careful fiscal management. Fueled by government initiatives and rising demand, the thriving metals sector stands out as a beacon of economic optimism in the coming years. As the Budget unfolds, stakeholders across sectors will keenly observe the government’s moves, hoping for a budget that steers the nation towards economic recovery and paves the way for sustainable and inclusive growth.

Cement Sector In Focus:

Anticipated measures encouraging higher private-sector investment could significantly impact the cement industry. Incentives and initiatives aimed at attracting private investors may translate into increased projects and, subsequently, higher cement consumption in sectors where private investment has historically been limited.

• A potential boost in export-focused policies could open new avenues for the cement sector. Budget 2024 may introduce measures to support and enhance the export capabilities of cement manufacturers, aligning with broader efforts to revitalize export growth.
• While subsidy rationalization is expected to continue, the cement sector could benefit from redirected subsidy savings. Increased spending on rural infrastructure, a key recommendation, could drive demand for cement in construction projects related to rural development.
• Projections for government borrowing and fiscal deficit targets could be critical for the cement sector. A well-managed borrowing program and sustained infrastructure investment would ensure a steady demand for cement products in large-scale projects.
• As government bond yields are anticipated to lower, the borrowing costs for infrastructure projects may decrease. This could positively impact the cement sector, making large-scale projects more economically viable and contributing to increased demand for cement.
• The cement sector is a barometer of growth in the broader economic landscape. As the government continues its push for infrastructure development, cement demand is expected to remain robust. The consolidation and capacity additions in the sector position cement companies well to capitalize on the expected growth.
• With the government’s emphasis on sustainable and inclusive growth, the cement sector’s role in building essential infrastructure aligns with the national agenda. As Budget 2024 unfolds, stakeholders in the cement industry will closely watch for policy announcements that foster economic recovery and provide a conducive environment for the cement sector to thrive. The potential for increased demand, coupled with a supportive policy framework, paints a promising picture for the cement industry in the coming fiscal year.

Market this week

Source: BSE and NSE

Weekly Leader Board

Source: BSE

Stocks that made the news this week:

• Kotak Mahindra Bank reported a 7.6 percent increase in net profit for the December quarter, reaching Rs 3,005 crore, slightly below market expectations of Rs 3,243 crore. The bank’s net interest income (NII) of Rs 6,554 crore exceeded analyst estimates of Rs 6,434 crore, with a net interest margin (NIM) of 5.22 percent. While the bank’s asset quality improved, gross non-performing assets (NPAs) were at 1.68 percent, missing the anticipated 1.63 percent, and net NPAs stood at 0.36 percent, compared to the expected 0.34 percent. Despite falling short of expectations, the bank demonstrated resilience in its financial performance during the period.
• Zee Entertainment Enterprises witnessed a 3.2 percent surge in morning trade on January 20 as the media and entertainment firm reiterated its dedication to the $10-billion merger with Sony’s Indian arm. Following reports of a board meeting held by the Sony Group on January 19, discussions are underway to make a decision regarding the proposed merger, signaling ongoing developments in the potential $10-billion deal between Sony and Zee Entertainment Enterprises.
• NHPC experienced a significant intraday surge of 15 percent on January 20, following a robust response to the government-owned company’s offer for sale (OFS). The successful OFS, which featured a 3.5 percent stake offloaded at a floor price of Rs 66 per share, garnered strong interest from both retail and institutional investors. Institutions submitted bids for 91 crore shares, surpassing the 22.6 crores shares available, during the offering that opened on January 18. The retail portion, open the following day, received bids for 3.8 crore shares against the reserved 2.5 crore shares.

Please visit www.fisdom.com for a standard disclaimer.