Top 5 Stocks for Investors After Budget 2024

With the budget behind us, investors are now looking ahead to find the best stocks to buy.

While the budget disappointed investors and traders due to the tax hikes, the market will eventually move on after a period of consolidation.

This is a good time to clean up your portfolio by getting rid of stocks with poor fundamentals and any stocks you may have bought for speculative reasons due to the budget.

Instead build your watchlist of fundamentally solid stocks and be prepared to act if these stocks experience a temporary decline.

In this editorial, we look at 5 stocks that should be on your post budget watchlist if they aren't already.

Read on...

#1 Mahindra & Mahindra (M&M)

The biggest beneficiary of the budget was the rural sector. The budget allocated Rs 2.66 trillion (tn) to the rural economy.

This will be mostly directed towards rural infrastructure development along with rural welfare schemes. Some of the Rs 3 tn allocation towards women-oriented schemes will also benefit rural India.

One of the biggest beneficiaries of additional government spending on the rural economy is M&M. As the world's largest tractor and farm equipment company, it's a play on higher spending by farmers.

The equation is simple. As farmers' incomes improve, more farm machinery is sold. This is true all over the world. As the government invests more in the rural economy, farmers will be either a direct or indirect beneficiary.

This will eventually lead to higher sales for M&M.

Also, M&M has outlined significant future plans, emphasising a substantial increase in investments and capacity expansion across various segments.

While most of these investments are lined up for the auto segment, a significant chunk will be spent of the tractor segment too.

Mahindra & Mahindra (M&M) is the flagship company of the Mahindra group, which consists of diverse business interests across the globe. Its farm equipment segment involves the sale of tractors, agri equipment, and spare parts.

To know more, check out Mahindra & Mahindra's factsheet and quarterly results.

#2 Kaveri Seed

The stock has been in the limelight ever since the finance minister said the government will release 109 high-yielding climate-resistant seeds for 32 field and horticultural crops.

Kaveri Seed Company is one of the leading agricultural seed production companies in India. It engages in the production, processing, and distribution of seeds.

Its products include both field crops and vegetables. The company has developed a specialisation in hybrid seeds for various Indian crops.

Kaveri Seed constantly launches new products across segments including cotton, maize, vegetables, millet mustard, wheat, sorghum, sunflower, and rice. These products efforts are backed by strong R&D.

The company has gained market share in cotton seeds in states like Gujarat, Maharashtra, and Haryana.

It has also experienced good growth in the international market such as Pakistan, Sri Lanka, Bangladesh, and Vietnam.

It's a debt free, dividend paying company with stable profit margins.

To know more, check out Kaveri Seed Company's factsheet and quarterly results.

#3 HUDCO

Housing and Urban Development Corporation (HUDCO) is an Indian public sector undertaking (PSU) engaged in housing finance and infrastructure project finance. The government granted Navratna status to PSU on 18 April 2024.

On 11 June 2024, the NDA government announced that it will expand the Pradhan Mantri Awas Yojana by constructing an additional 30 million (m) rural and urban homes.

The government's focus on affordable housing in the budget will be beneficial to HUDCO. In the budget speech, the finance minister introduced the PM Awas Yojana Urban 2.0. This was aims at providing housing for all in urban India.

This is to be achieved by meeting the housing needs of 10 million poor and middle class families with an investment of Rs 10 tn over 5 years.

HUDCO aims to increase its assets under management (AUM) to over Rs 1.5 trillion (tn) by financial year 2026, up from the current Rs 840 billion (bn).

The company is well placed to grow in the future. Currently, it's focused on reducing funding costs, resolving stressed assets, and diversifying its loan portfolio.

To know more, check out HUDCO's factsheet and quarterly results.

#4 Hero MotoCorp

Whenever the government has prioritised spending in rural India, a consequence has always been an increase in two wheeler sales.

Hero MotoCorp India's two-wheeler giant; is a leading player in rural and semi-urban India. When it comes to motorcycles and scooters, these regions account for a whopping 55% of total sales in the country, and Hero MotoCorp sits firmly at the helm.

The company is the strongest brand in rural India with over 5,000 distribution points in rural India, the highest in the industry.

Hero Moto's dominance is a testament to its deep understanding of the rural market. The company prioritizes affordability and fuel efficiency, particularly in the high-demand 100cc to 110cc segment, perfectly matching the needs of rural customers.

It has gone a step further by keeping entry-level vehicle pricing in check, ensuring the bikes remain highly competitive and accessible.

In 2023, the company did report a slowdown in the 100cc to 110cc segment, thanks to slow demand uptake in the rural market. This is likely to reverse going ahead.

To know more, check out Hero MotoCorp's factsheet and quarterly results.

#5 ITC

The FMCG sector was a big winner in this year's budget. This was due to the government's rural focus.

FMCG firms are heavily dependent on rural sales for growth. The last few years haven't been great in this regard. However, things could be different. These stocks were in the limelight on budget day.

The most logical choice for your watchlist from the FMCG pack would be ITC.

From being a one-product category company, ITC is now a company with a portfolio spanning 20 categories with over 1,500 products. This is due to its expansion into the FMCG sector. The company is now among India's largest in the FMCG sector.

Recognising the rising consumer preference for natural and healthier products, alongside traditional options, the company is actively expanding its rural distribution.

Considering its past growth as well as its current plans, ITC is quite capable of achieving a growth of 15% per annum in earnings over the medium term.

It's also a dividend paymaster. ITC has paid out consistent dividends since 1994 and has consistently raised the dividend.

To know more, check out ITC's factsheet and quarterly results.

Conclusion

Investors should not base their specific investment decisions on events like the budget. History has proven that the market forgets about the budget very quickly.

However, some decisions like the rural push is important. Such decisions will have a material impact on specific stocks. Investors should consider rural themed stocks for their post budget watchlist.

Investing in stocks that receive a boost in the budget could be profitable in the short term too. But you should exercise a lot of caution here.

The rules of long term investing don't change just because of the budget. You will still need to do your due diligence on any stock before investing in it.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...