Our assumptions

We are basing are assumptions on two factors: One is that there would be some increase in the tax slabs or other tax benefits like sec 80C resulting in higher disposable income and the second is a boost to the rural farm output in the Union Budget 2017-18. Both of these are highly possible.

Hero Honda

The company makes some very good models, particularly catering to the low and mid segment of the market. We believe there is unlikely to be any tax changes that may occur due to the budgetary recommendations directly for two wheelers. However, in all probability there might be some tax breaks for tax payers, which could result in higher disposable income, propelling sales of companies like Hero Motor Corp.
The stock is not too expensive at 15 times, one year forward p/e.

Kaveri Seeds

We believe that the Union Budget 2017-18 may have some sops for agriculture and a thrust on pushing agricultural performance higher. Last year the government planned to double farmer income in 5 years and there would be moves to enhance the same. Kaveri Seeds is among the top players in the seed business and is the leading player of cotton seeds in India. If there is a thrust on agriculture the company tends to benefit. Again, the stock is not too expensive at the current price of Rs 458. In fact, it is quoting at a 1-year forward p/e of just 10 times. Low equity and strong cash flows make it other positives for the company.

Jain Irrigation

Jain Irrigation is another company that could benefit from the government's thrust on agriculture and boosting rural income in the forthcoming budget. Jain Irrigation is into sprinkler systems, drip irrigation systems etc. The company has been performing well in the last few years and this could also be a positive for the company. However, we wish to emphasize that the company reported a very small net profit for the quarter ending Sept 30, 2016. The stock is more expensively priced on a fundamental basis as compared to Kaveri Seeds, though the area of business is totally different.

Bajaj Auto

Bajaj Auto is another stock that could benefit, if the government either increases the tax slabs and hence higher disposable income or increases rural spending to boost income. The company's range of models cater to all segments, which augurs well for it. Again we believe that the company can report an EPS of Rs 155 at the very least, which makes the stock not very expensive around the Rs 2800 range. Buy, if you also have a long term perspective in mind, as the company is likely to do well on the export front as well.

Mahindra and Mahindra

This is one of the largest tractor manufacturers in the world. We believe there would be an increased emphasis on rural spending, which should improve the prospects of a player like Mahindra and Mahindra. A good stock to buy ahead of the budget. From a fundamental perspective as well the stock is not very expensive.

PI Industries

PI is one of the leading AgroChemical companies in India.   PI manufactures agrochemicals, plant nutrients and plant protection, specialty fertilizers and hybrid seeds in the domestic market. Again, a good bet for those looking for Union Budget boost to the agriculture sector.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.