For Private Circulation Only
Agriculture and Farmers: Launched PM-KISAN
Housing: GST council to consider reducing
GST burden for home buyers. Extension of 80-
IAB benefit for one more year. Extension of
exemption on notional rent to two years on
unsold inventory.
Railways and Infrastructure: Capital support of
Rs64,587 crore for FY19-20 (BE). Overall railway
capex for FY1-20 is expected to be Rs1.58L crore.
Allocation for North-East area is increased 21%
to Rs58,166 crore for 2019-20 (BE).
Defence: Defence budget for FY19-20 (BE) is
pegged at Rs3.0L crore .
program to provide Rs6,000 per annum for
small and marginal farmer. Creation of
separate fisheries department and Rashtriya
Kamdhenu Aayog. 2% interest subvention and
3% additional subvention for timely
repayment of loans.
Salaried and Middle Class: Zero tax for
taxable income up Rs5 lakh. Increased
standard deduction from Rs40,000 to
Rs50,000. Increased the TDS limit on interest
on bank FD and Post office to Rs40,000 from
Rs10,000.
Government Finances and Fiscal Deficit: Fiscal
deficit target is at 3.4% for FY19-20 (BE). Total
expenditure increased from Rs24.57L crore to
Rs27.84L crore for FY19-20 (BE). Gross
borrowings at Rs7.1L crore while market
borrowing is pegged at Rs4.48L crore for FY19-
20 (BE).
 Interim Budget – FY 2019-20

Executive Summary:
The Interim Budget has broken convention and brought in Direct Tax changes that normally one would
have expected the new government taking charge after May 2019 to usher in. These tax changes favour
low income earners.
For starters, the middle class salaried person’s tax is effectively brought to zero for incomes upto Rs7.5L
(standard deduction/80C deductions/NPS et al) unlike the previous year’s zero tax for incomes upto
Rs4.9L. This is quite revolutionary as it will directly help about 3 crore small income earners save a
maximum of upto Rs14,500 (plus cess) if the salary was Rs7.5L. The average savings appear to be Rs6,000
per head.
While the widely anticipated Universal Basic Income did not materialize, it did come in the form of PM-
KISAN, an assured income support scheme to the small and marginal farmers whose landholdings of
cultivable land is upto 2 hectares. The support is at the rate of Rs6,000 per farmer per year. This will help
about 12 crore farmers.
Both these moves will be consumption accretive as it gives about Rs6,000 in the hands of roughly 15 crore
persons.
The Interim Budget has ingeniously come to the aid of the real estate sector by providing a slew of
benefits such as extension of 80-IBA being extended for one more year, extension of period of exemption
from levy of tax on notional rent on unsold inventory from one year to two years, benefit of rollover of
capital gains under section 54 from one house to two houses and exemption of income tax on notional
rent on a second self-occupied property. These measures will also help boost the construction industry, a
major provider of jobs leading to further consumption boost.
The good part of the budget is that the Debt-GDP of the Central government has remained astutely on a
declining path. From about 50.5% in FY18 it is set to reduce to 48.9% in FY19 and then projected to fall to
43.4% in FY22. This is possible due the consistent decline in the primary deficit achieved through
moderate, mere 8.3% CAGR over FY14-to-FY18, increases in expenditure of the government. This had a
benign impact on inflationary expectations.
However, FY19 has been a different year with the expenditure initially budgeted to grow at 10.1% (BE
FY19 over RE FY18) rising much more rapidly by 14.7% (RE FY19 over Actual FY18) by the time the year
ends. The Interim Budget presented today prescribes a rise of 13.3% for BE FY20 over RE FY19. Such
acceleration in expenditure will possibly affect the inflationary expectations quite sharply. No wonder the
Gross Market Borrowings are budgeted to increase to Rs7.1L crore from Rs5.7L crore. These numbers
when viewed through the prism of ratio-to-GDP does not seem overwhelmingly onerous as GDP revisions
have softened the numerator increase effect quite appreciably. Moreover, the fiscal deficit numbers are
seemingly at 3.4% of the GDP for both FY19 as well as FY20 for the very same reasons.
The budget in our view is indeed consumption oriented and clearly targeted at helping a large section of
low income earners have a bit more in their hands. While inflationary expectations will rise, stock markets
will probably watch policy rates more intently now.

Fiscal Deficit PM - KISAN Total expenditure

Estimate Rs6,000/- p.a. to small increased 13.3% to
3.4% of GDP & marginal farmers Rs27.84L crore

2
 Interim Budget – FY 2019-20

Budget at a glance:
2017-18 2018-19 2018-19 2019-20
Particulars(In Rs crore) Budget Revised Budget
Actual
Estimates Estimates Estimates
1 Revenue Receipts 14,35,233 17,25,738 17,29,682 19,77,693
Growth 20.5% 14.3%
2 Tax Revenue (Net to Centre) 12,42,488 14,80,649 14,84,406 17,05,046
3 Non-Tax Revenue 1,92,745 2,45,089 2,45,276 2,72,647
4 Capital Receipts* 7,06,742 7,16,475 7,27,553 8,06,507
Growth 2.9% 10.9%
5 Recoveries of Loans 15,633 12,199 13,155 12,508
6 Other Receipts 1,00,045 80,000 80,000 90,000
7 Borrowings and Other Liabilities** 5,91,064 6,24,276 6,34,398 7,03,999
8 Total Receipts (1+4) 21,41,975 24,42,213 24,57,235 27,84,200
9 Total Expenditure (10+13) 21,41,975 24,42,213 24,57,235 27,84,200
Growth 14.7% 13.3%
10 On Revenue Account of which 18,78,835 21,41,772 21,40,612 24,47,907
11 Interest Payments 5,28,952 5,75,795 5,87,570 6,65,061
12 Grants in Aid for creationof capital assets 1,91,034 1,95,345 2,00,300 2,00,740
13 On Capital Account 2,63,140 3,00,441 3,16,623 3,36,293
14 Revenue Deficit (10-1) 4,43,602 4,16,034 4,10,930 4,70,214
(-2.6) (-2.2) (-2.2) (-2.2)
15 Effective Revenue Deficit (14-12) 2,52,568 2,20,689 2,10,630 2,69,474
(-1.5) (-1.2) (-1.1) (-1.3)
22 Fiscal Deficit [9-(1+5+6)] 5,91,064 6,24,276 6,34,398 7,03,999
(-3.5) (-3.3) (-3.4) (-3.4)
23 Primary Deficit (16-11) 62,112 48,481 46,828 38,938
(-0.4) (-0.3) (-0.2) (-0.2)
* Excluding receipts under Market Stabilisation Scheme
** Includes drawdown of Cash Balance

Notes:
(i) GDP for BE 2019-2020 has been projected at Rs 2,10,07,439 crore assuming 11.5 % growth over the estimated GDP of
Rs 1,88,40,731 crore for 2018-2019(RE).
(ii) Individual items in this document may not sum up to the totals due to rounding off.
(iii) Figures in parenthesis are as a percentage of GDP.

3
 Interim Budget – FY 2019-20

Key Interim Budget Highlights:

The Finance Minister has focused on ten distinct themes in the Interim Budget 2019-20.
• Farmers’ charmer: In order to provide relief to the distressed farmers, the government has taken a historic
decision andfixed the minimum support price (MSP) of all 22 crops at minimum 50% more than the cost. A new
programme namely “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)” has been launched, which will provide
direct income support to the vulnerable landholding farmer families at the rate of Rs6,000 per year in three
equal installments. Outlay of Rs75,000 crore has been proposed for the same for FY 2019-20, revised upwards
from Rs20,000 crore in FY 2018-19.
• Taxpayers’ cheer: Tax relief has been provided to salaried class as the Finance Minister announced full tax
rebate for person having annual income up to Rs5 lakh. Also, Standard Deduction has been increased from the
current Rs40,000 to Rs50,000. This will result in a tax benefit of Rs23,200 crore to an estimated 3 crore middle
class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior
citizens.
• Increasing tax base: In 2018-19, direct tax collections increased significantly to almost Rs12L crore from
Rs6.38L crore in 2013-14, pushing the number of returns filed 80% higher to Rs6.38L crore this year from
Rs3.79 crore in 2013-14. On the Indirect tax, GST exemptions for small businesses have been doubled from
Rs20 lakh to Rs40 lakh and small businesses having turnover up to Rs1.5 crore have been given an attractive
composition scheme wherein they pay only 1% flat rate and have to file one annual return only. Despite these
exemptions, average monthly tax collection in the current year is Rs97,100 crore per month in 2018-19 as
compared to Rs89,700 crore per month in 2017-18.
• Fiscal management: Populist measures taken by the government have pushed the fiscal deficit slightly higher
to 3.4 percent of GDP in FY19 from 3.3 percent estimated earlier and is expected to be 3.4 percent (Rs7.04L
crore) for FY20 (BE). The government had overshot the target much earlier as it spent Rs7.15L crore in
November’18 itself compared to Rs6.24L crore for the whole year. However, revenue shortfalls and increased
spending ahead of the general election in May 2019 was widely expected to push the deficit numbers sharply
higher.
• High spending: The Budget Revised Estimates for expenditure in 2018-19 are Rs24.57L crore (net of GST
compensation transfers to the States) as against the Interim Budget Estimates of Rs24.42L crore. The
government spending is expected to increase further in 2019-20 BE to Rs27.84L crore despite low inflation.
• Disinvestment target: The Government is confident of achieving target of Rs80,000 crorethrough
disinvestment proceeds this year, though this looks far-fetched as it has collected only Rs35,533 crore so far in
2018-19. The Finance Minister has set disinvestment target of Rs90,000 crore for 2019-20 (BE).
• Digital India: Finance Minister announced the Digital Villages initiative to connect as many as 1 lakh villages
with the digital services offered by the Government, within the next five years after covering 700 villages in
India by the end of 2018.
• House owners’ relief: Taking into account the middle class woes to maintain families at two locations citing job,
children’s education, care of parents etc, the Finance Minister has proposed to exempt levy of income tax on
notional rent on a second self-occupied house.In line with the same, benefit of rollover of capital gains under
section 54 of the Income Tax Act which was allowed only on one residential house earlier has been increased to
two for a tax payer having capital gains up to Rs2 crore. Additionally, TDS threshold for tax deduction on rent is
proposed to be increased from Rs1,80,000 to Rs2,40,000.

4
 Interim Budget – FY 2019-20

• Real boost to real estate: Real estate sector got a much needed relief as the Finance Minister proposed to
extend the notional rent exemption period on unsold inventories, from one year to two years, from the end of
the year in which the project is completed. Also, Affordable Housing received a boost as benefits under Section
80-IBA of the Income Tax Act is being extended for one more year, i.e., to the housing projects approved till
31st March, 2020. The GST council to consider lowering the GST burden for home buyers.
• 10 dimensions of Vision 2030: Ten directives have been finalized for Vision 2030 as India is likely to be a five
Trillion Dollar Economy in the next five years and aspires to be a Ten Trillion Dollar Economy in the next 8 years
thereafter. The list includes better infrastructure both physical as well as social, Digital India, Pollution free
status, Rural development, Clean rivers, Coastline development, Space programme, self-sufficiency in food,
Robust health care and wellness system, Minimum Government Maximum Governance nation. All these are
expected to make India a place where poverty, malnutrition, littering and illiteracy would be a matter of
the past.

5
 Interim Budget – FY 2019-20

Based on key takeaways of Interim Budget 2019-20, we hereby bring our Budget stock picks which include
• 9 Fundamental stocks having Positive impact of budgetary announcements
• 4 Fundamental stocks that tend to give returns irrespective of budget proposals
• Three Technical buy calls
• Two Derivatives calls and Two Derivative strategies
• One Currency call and One Currency strategy
see page 8

Performance of budget stocks of previous year:

SR. Recommended CMP Target Upside High Price Highest possible
Company Name
No. Date (Rs.) (Rs.) (%) reached return

1 AksharChem (India) Ltd 01‐02‐2018 725.0 890.0 23.0 739.0 2.0

2 Apar Industries Ltd 01‐02‐2018 742.0 875.0 18.0 821.0 11.0
3 Bharat Electronics Ltd 01‐02‐2018 162.0 190.0 17.0 163.0 -
4 Britannia Industries Ltd* 01‐02‐2018 2,370.0 2,750.0 16.0 3,467.0 Target achieved
5 Dr Lal Pathlabs Ltd 01‐02‐2018 910.0 1,050.0 15.0 1,122.0 Target achieved
6 GAIL (India) Ltd* 01‐02‐2018 365.0 428.0 17.0 399.0 10.0
7 Hero MotoCorp Ltd 01‐02‐2018 3,732.0 4,300.0 15.0 3,825.0 2.0
8 Hindustan Zinc Ltd 01‐02‐2018 308.0 360.0 17.0 340.0 10.0
9 ICICI Lombard Gen. Ins. Co. Ltd 01‐02‐2018 834.0 1,010.0 21.0 932.0 12.0
10 JHS Svendgaard Lab. Ltd 01‐02‐2018 69.0 80.0 16.0 71.0 3.0
11 NBCC (India) Ltd* 01‐02‐2018 115.0 143.0 25.0 118.0 3.0
12 Ruchira Papers Ltd 01‐02‐2018 181.0 216.0 19.0 204.0 13.0
13 UltraTech Cement Ltd 01‐02‐2018 4,391.0 5,050.0 15.0 4,494.0 2.0
14 The New India Ass. Co. Ltd* 01‐02‐2018 334.6 360.5 8.0 N.A. SL triggered
15 Apollo Hospitals Enterprise Ltd 01‐02‐2018 1,219.0 1,305.0 7.0 1,387.0 Target achieved
16 Bajaj Finserv Ltd. 01‐02‐2018 5,038.0 5,430.0 8.0 7,200.0 Target achieved
17 M&M - Future 01‐02‐2018 801.0 845.0 5.0 N.A. SL triggered
18 Bata India - Future 01‐02‐2018 713.0 771.0 8.0 N.A. SL triggered
19 GBPINR Feb 01‐02‐2018 91.0 93.0 1.0 93.0 Target achieved
*the marked scrips underwent a corporate actions such as spilt or bonus issues and hence call prices, target prices are accordingly adjusted.

6
 Interim Budget – FY 2019-20

Budget Proof Stocks

What are Budget Proof Stocks?
Budget Proof stocks are stocks that tend to give returns irrespective of budget proposals aiding or hindering their
businesses. Their ability to give returns often stems from their strong instincts which convert challenges into
opportunities or they have moats that insulate their businesses from budgetary provisions. They could also be into
businesses largely unlinked to the Indian economy.
What screening criteria did we use to spot such stocks?
Without getting into loads of data of the entire universe of stocks, we simply looked at the top 100 stocks first. The
anchor point chosen was the close price of these stocks on the budget day while the return criterion was the
stock’s performance over the next 30 days. In other words, we found the point-to-point post budget 30-day return
of these 100 stocks. We repeated this exercise for the past 15 occasions when the budget was presented including
two interim budgets. Having got the 15 data points for these 100 stocks, we marked the number of occasions the
stock rose at least 1% versus the number of occasions it failed to give 1% returns. We also excluded stocks for
which 15 data points weren’t available. These were mostly recent listing stocks.
We screened those stocks which rose on 9 occasions and fell on 6 occasions. (rise refers to >1%; fall refers to <1%).
We had a list of 18 stocks to choose from. They were

Britannia Inds. Hero Motocorp Hind. Unilever

M&M PiramalEnterp. BHEL
Infosys MothersonSumi Havells India
Dabur India HDFC Bank TCS
Axis Bank Container Corpn. Biocon
Bharti Airtel Cadila Health. Godrej Consumer

Narrowing the selection

Having got the initial screening list, we simply narrowed down the stocks on our premise of what constitutes strong
instincts, insulating moats and non-linked to Indian economy stocks. Moreover, we also narrowed the stocks
election based upon the general business outlook that these companies currently have.
Our (Fundamental team) final selection of Budget Proof Stocks are: Asian Paints, Container Corp, Siemens and
Infosys.
Some of the ones also chosen by the Technical & Derivative teams are: Britannia, Dabur India, Hero MotoCorp.

7
 Interim Budget – FY 2019-20

Our Stock Recommendations:

Nature of
SR. No. Company CMP Target Stop Loss Upside (%)
recommendation
1 Asian Paints Ltd 1,457.2 1,650.0 NA 13.2 Fundamental
2 Coromandel International Ltd 456.8 540.0 NA 18.2 Fundamental
3 Larsen & Toubro Ltd 1,324.6 1,525.0 NA 15.1 Fundamental
4 Mahindra & Mahindra Ltd 688.4 795.0 NA 15.5 Fundamental
5 Siemens Ltd 1,031.1 1,160.0 NA 12.5 Fundamental
6 Infosys Ltd 757.1 880.0 NA 16.2 Fundamental
7 Bajaj Finance Ltd 2,628.4 3,030.0 NA 15.3 Fundamental
8 ICICI Bank Ltd 354.7 421.0 NA 18.7 Fundamental
9 National Fertilizer Ltd 34.9 39.0 NA 11.7 Fundamental
10 Container Corporation Of India Ltd 658.7 805.0 NA 22.2 Fundamental
11 PNB Housing Finance Ltd 922.4 1,050.0 NA 13.8 Fundamental
12 Sobha Ltd 478.5 550.0 NA 15.0 Fundamental
13 Insecticides India Ltd 589.7 695.0 NA 17.9 Fundamental
14 Apollo Hospitals Enterprise Limited 1341.3 1465.0 1275.0 9.2 Technical
15 Escorts Limited 678.0 746.0 644.0 10.0 Technical
16 Britannia Industries Limited 3251.0 3555.0 3099.0 9.4 Technical
17 Dabur Future 453.5 472.0 445.0 4.1 Derivative
18 Equitas Future 125.3 135.5 120.0 8.1 Derivative
19 JPYINR February 65.7175 67.0 64.8 2.0 Currency

Note: CMP as on 1st February, 2019; Our Institutional recommendations may differ from above as they are on a continuous coverage basis

HeroMotoco Strategy:
Lot Avg. Max Profit Max Loss
Scrip Buy / Sell Range BEP
Size Price (on Expiry) (on Expiry)
HeroMotoco 2800 Feb Call 200 Buy 1 lot 75 77 76
Rs.13200 Rs.-6800 2834
HeroMotoco 2900 Feb Call 200 Sell 1 lot 41 43 42

DLF Strategy:
Lot Avg. Max Profit Max Loss
Scrip Buy / Sell Range BEP
Size Price (on Expiry) (on Expiry)
DLF 170 Feb Call 2,600 Buy 1 lot 7.2 7.4 7.3
Rs.17420 Rs.-8580 173.3
DLF 180 Feb Call 2,600 Sell 1 lot 3.9 4.1 4

Currency Option Strategy:

Avg. Max Profit Max Loss
Scrip Lot Size Buy / Sell Range Status
Price (on Expiry) (on Expiry)
USDINR 71.50 CE 1000 Buy 10 lot 0.1700 0.1800 0.1750 Unlimited
Upside or Rs.-3800 -
USDINR 71.25 PE 1000 Buy 10 lot 0.1900 0.2000 0.1950 Downside

8
 Interim Budget – FY 2019-20

Asian Paints Ltd. CMP: Rs 1457.2 | Target: Rs 1650.0

Asian Paints Ltd. is India’s largest and Asia’s third largest paint company with a turnover of Rs.16843 crores. The
company is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related
to home décor, bath fittings and providing of related services. It has state-of-the-art laboratories spread across
multiple locations around the world with over 200 highly qualified scientists. The products of the company include
ancilliaries, automotive, decorative paints, and industrial paints.
The company operates in 16 countries across four regions i.e. Asia, Middle East, South Pacific and Africa through
seven brands viz. Asian Paints, Berger, SCIB Paints, Apco Coatings, Taubmans, Causeway Paints and Kadisco. It has
26 state-of-the-art paint manufacturing facilities in the world. Asian Paints manufactures wide range of Decorative
and Industrial use. In Decorative paints, the company is present in all the four segments, namely Interior Wall
Finishes, Exterior Wall Finishes, Enamels and Wood Finishes.
The company provides wide range of services such as colour consultancy, home painting services, experience retail
stores, décor solutions and large projects. Over the last 5 years, the company has been growing at a CAGR of 8.7%
in terms of revenue. The company generates robust returns of +25% while its EBITDA margin is at +20%.

Budgetary Proposals
• Benefit for getting exemption from Capital Gains have been extended to two homes from one home which will
give a boost to paints industry as well.
• Full tax rebate on income of upto Rs5 lakh will increase consumer spending.

Coromandel International Ltd. CMP: Rs 456.8 | Target: Rs 540.0

Coromandel International Limited, India’s second largest Phosphatic fertilizer player, is in the business segments of
Fertilizers, Specialty Nutrients, Crop Protection and Retail. The Company manufactures a wide range of fertilizers
and markets around 4.5 million tons making it a leader in its addressable markets.

The Company is planning to promote unique grades and to get new products so that they give a better offering to
the farmers. They expect the Phos-Acid project to come up during the next year, which will reduce their
dependence on traded Phos-Acid and make Vizag plant fully integrated. They have launched new products in SSP
segment that will also help them to consolidate their position as far as the single super-phosphate is concerned.

In non-subsidy business, they continue to invest both in terms of capacity and capability in terms of their crop
protection side. Their new acquisition Bio has done exceedingly well which has led the company to expand their
products and market presence in America and Europe. They are eyeing at expanding even further by enhancing the
capacity and increasing their distribution reach. They are expanding their base in international markets where they
are now setting up subsidiaries so that they can own the registration and also start marketing activities.

The company has grown at a CAGR of 9% and 13% at topline and bottomline levels for last 5 years. It generates
return ratios between 17-22% with EBITDA margin of ~11% on its Dec 18 TTM consolidated earnings. At current
market price, the stock is trading at P/E multiple of 19.02x on its Dec18 TTM consolidated earnings.

Budgetary Proposals
• Launched PM-KISAN program to provide Rs6,000 per annum directly in the hand of small and marginal farmer
having land holding up to 2 hectares.
• An estimated expenditure of Rs75,000 cr per year to be implemented retrospectively from Dec 2018 onwards.
• Creation of separate fisheries department and Rashtriya Kamdhenu Aayog.

9
 Interim Budget – FY 2019-20

Larsen & Toubro Ltd. CMP: Rs 1324.6 | Target: Rs 1525.0

Larsen & Toubro is a major technology, engineering, construction, manufacturing and financial services
conglomerate, with global operations serving their clients since last 7 decades. L&T addresses critical needs in key
sectors like Hydrocarbon, Infrastructure, Power, Process Industries and Defence for customers in over 30 countries
around the world. As of FY18, the unexecuted order book from international markets stood at Rs625 billion, which
translates to 24% of the total order book.
Company has massive order book of Rs2,63,107cr as of FY18 which is steadily increasing on year on year basis.
Infrastructure, Hydrocarbon and Heavy Engineering businesses largely contributed to the growth in order inflows
which has huge potential due to country’s rising economic condition, government’s push for better infrastructure,
rapid urbanization etc. The Company successfully won fresh orders worth Rs152,908 crore at the group level
during FY18 registering a growth of 7% over the previous year.
The Government has committed sizeable budgetary allocation to augmenting road infrastructure. A thrust on
railway electrification and track augmentation is paving the way for increased opportunities in Company’s railways
business. Strong corporate governance, experienced and skilled management, ability to handle large projects with
ease, moderate growth guidance for upcoming periods announced by management along with boost from
budgetary announcement makes L&T a preferred pick among capital goods sector. At current market price, the
stock is trading at P/E multiple of 27.5x after its Dec 18 TTM standalone earnings.

Budgetary Proposals
• Capital support of Rs64,587 crore for FY19-20 (BE) for railway.
• Allocation for North-East area is increased 21% to Rs58,166 cr for 2019-20 (BE).
• Overall railway capex for FY19-20 is expected to be Rs1.58L crore.
• Budgetary Capital expenditure is estimated to be Rs 3,36,292 crore for FY19-20 (BE).

Mahindra & Mahindra Ltd. CMP: Rs 688.4 | Target: Rs 795.0

Mahindra & Mahindra Limited, which is a part of Mahindra Group, is an Indian car manufacturing corporation
headquartered in Mumbai, Maharashtra, India. It is one of the largest vehicle manufacturers by production in India
and the largest manufacturer of tractors in the world.
The first month of the new calendar year continues to be on an overall growth path. The company’s domestic sales
touched 55,722 vehicles during January 2019, as against 52,063 vehicles in January 2018, a growth of 7%. With the
auto industry registering double-digit growth for the first time in seven years, Electric Vehicles (EV) segment
expecting to grow as both state and central governments are focusing on this environment friendly form of
mobility and the government’s plan to double farmer income by 2022, it is likely to open new opportunities for
M&M. Having successfully established the Marazzo & Alturas brands and with the recent launch of their new
compact SUV, the XUV300, a positive outlook is expected.
The company has grown at a CAGR of 7% and 10% at topline and bottomline levels for last 5 years. It generates
return ratios between 10-11% with EBITDA margin of ~13% on its Sept TTM standalone earnings. Optimism shown
in rural growth, commodity costs leveling, fuel prices coming down and improvement in Forex movement is
expected to drive positive customer sentiment. At current market price, the stock is trading at P/E multiple of
16.63x on its Sept 18 TTM standalone earnings.

Budgetary Proposals
• Launched PM-KISAN program to provide Rs6,000 per annum directly in the hand of small and marginal farmer
having land holding up to 2 hectares.
• An estimated expenditure of Rs75,000 cr per year to be implemented retrospectively from Dec 2018 onwards.
• Zero tax for taxable income up Rs5 lakh. Increased standard deduction from Rs40,000 to Rs50,000.

10
 Interim Budget – FY 2019-20

Siemens Ltd. CMP: Rs 1031.1 | Target: Rs 1160.0

Siemens Limited, in which Siemens AG holds 75% of the capital, is the flagship listed company of Siemens AG in
India. It focuses on the areas of electrification, automation and digitalization. It is one of the leading producers of
technologies for combined cycle turbines for power generation; power transmission and distribution solutions;
infrastructure solutions for Smart Cities and transportation; automation and software solutions for industry.
The company has partnered with the industry and government through technology solutions in electrification,
automation and digitalization. The Company has set an industry milestone in the area of Additive Manufacturing in
the power generation industry with the company’s first replacement parts 3D-printed from metal for an industrial
steam turbine. These parts are installed at JSW steel Ltd.’s plant in Salem, Tamil Nadu. It commissioned the world’s
largest static synchronous compensator (STATCOM) solution, manufactured in the Company’s Goa factory for
Power Grid Corporation of India Limited.
The company has grown at a CAGR of 4% and 8% at topline and bottomline levels for last 5 years. It generates
return ratios of ~11% with EBITDA margin of ~10% on its Sept annual standalone earnings. Its base orders grew 28%
YoY whereas overall order inflow declined 6% YoY. The Company’s Management expects to maintain growth in line
with the market in future. A higher growth rate is expected with increased investments by the government of India,
public sector undertakings and state governments in infrastructure, industry and utility services. At current market
price, the stock is trading at P/E multiple of 40.7x on its Sept annual standalone earnings.
Budgetary Proposals
• Capital support of Rs64,587 crore for FY19-20 (BE).
• Overall railway capex for FY19-20 is expected to be Rs1.58L crore.
• Budgetary Capital expenditure is estimated to be Rs 3,36,292 crore for FY19-20 (BE).

Infosys Technologies Ltd. CMP: Rs 757.1 | Target: Rs 880.0

Infosys Technologies Ltd is India’s second largest and multi-billion dollar IT conglomerate. The Company has
expanded the service footprints right from ADM, Software Re-engineering-Consulting-Outsourcing-BPO-
Automation to more latest digital service. The company has been heavily investing to new generation services like
automation and digital service offerings which form nearly 25% of its >$10 billion annual revenue which has grown
+31% YoY during as on Dec 2018. This saves cost as well as waits time which is amounted to be 8 million wait hours
with 95% of queries process through online. Its products Infosys NIA, Finacle, McCamish are highly scalable and
occupy unique space at client end across 100+ countries.
The company has robust financials with free cash flow generation of nearly $2 billion, employing +204k across 45
countries and cash & cash equivalent of $4.9 billion. The company has been generating steady revenue growth of
+22% YoY with high single digit operating margin. Infosys has revised its revenue growth upwards to 8.5-9.0% from
6-8% in CC for FY19 (implying 0.2-2.0% QoQ in Q4) on the back of strong deal wins, a healthy deal pipeline and
traction in digital (5.0%/33.1% QoQ/YoY). The company expects clients’ IT spending budgets to be flat in CY19, with
higher focus on digital. Acceleration in growth momentum with recovery in margin as investment intensity
moderates will help Infosys narrow its valuation gap with TCS. Considering improving growth trajectory, healthy
cash generation and attractive valuation we have strong positive views on the stock for medium to long term
investors.
The Indian equity market is currently surrounded by many headwinds and uncertainties viz Volatile currency,
uncertain election outcomes, fiscal slippages due to highly populous budget, rising commodity prices, uptick in
inflation and interest rates etc. Infosys is insulated against these developments as growth is largely export driven
with wide spread revenue flow from different markets. Being cash rich and reasonable valuation backed by strong
management further strengthen the investors’ confidence.

Budgetary Proposals
• N.A.

11
 Interim Budget – FY 2019-20

Bajaj Finance Ltd. CMP: Rs 2,628.4 | Target: Rs 3,030.0

Bajaj Finance Ltd is +3 decade old AAA rated non-banking finance company having diversified business operations
in the areas of loans, card, investment, insurance to diverse segments like consumer, rural, SME, commercial and
mortgage etc. The company has presence across +85,000 distribution points serving to over 32 million customers.
The company belongs to one of the most trusted business conglomerates (Bajaj Group). The lending AUM mix is
diversified across Rural, EM, and Commercial and mortgages etc. The AUM for Bajaj Finance has registered 42%
CAGR in last 11 years from Rs2478 cr to Rs84, 033 cr between FY08-18. In spite of rapid expansion in balance sheet
and customer base, the company has been able to maintain robust track record of RoA, asset quality, Opex at
3.9%, 0.36% (GNPA) and 41.8% respectively.
The company has been riding on robust growth prospects across the verticals like housing, consumer finance, auto
loans, SME credit, distribution of insurance and investment products etc. we expect the momentum to be
maintained going ahead.

Budgetary Proposals
• Higher disposable income in the hands of tax payers and DBT allocation to help mobilising credit and drive the
consumer durable demand.
• Ujjwala scheme along with power for all to drive the household appliance demand.
• Exemption from levy of income tax on notional rent on a second self-occupied house and extend the period of
exemption from levy of tax on notional rent on unsold inventories from one year to two years to drive housing
loan book.
• Curtailed fiscal deficit target of 3.4% to help reducing policy rates.

ICICI Bank Ltd. CMP: Rs 354.7 | Target: Rs 421.0

ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through
a variety of delivery channels and through its group companies. It is India's largest private sector bank with total
consolidated assets of +Rs12L crore as at Dec 31, 2018 and currently has a network of 4,867 Branches and 14,944
ATMs across India.
The growth overhang seems to be getting over and we believe the strong CASA backed banks like ICICI would be
key beneficiaries. The CASA for the bank is now stands at 49.3% which has improved from 43% three years back.
The bank is de-risking the lending side focusing more on high rated corporate book while continue to SME/MSME
portfolio. The bank has reported surprised 13% sequential growth in loan book, highest since FY16 suggesting
turnaround in credit growth.The retail book is now stands at Rs3.3L crore forming 59% of total book. The retail in
Q3FY19 has registered 22% YoY growth highest across the entire segment while personal jumped 50% YoY.
Housing remains largest constituent with 51.4% of total retail book. The overall retail composition has jumped
from 42.4% In FY15 to 59% in Q3FY19. We believe, the bank would continue to focus on retail to have healthy
growth mix.
ICICI Bank’s back book clean-up appears nearly complete. While the ageing of NPLs (80% in doubtful category, as
per our estimates) demands higher provisioning, current provisioning (PCR>75%) and moderating NPL formation
suggests normalization in credit costs from FY20e onwards.

Budgetary Proposals
• Higher disposable income in the hands of tax payers and DBT allocation to help building low cost CASA as well
provide consumption boost thereby increasing the demand for retail credit.
• Raised TDS threshold limit from Rs10K to 40K to help garnering larger share of bank fixed deposits.
• IBC process to further strengthen the recovery process.

12
 Interim Budget – FY 2019-20

National Fertilizers Ltd. CMP: Rs 34.9 | Target: Rs 39.0

NFL, Miniratna Company, is a major Indian producer of chemical fertilizers, organic fertilizers and industrial
chemicals whose 3/4th share is owned by Government of India. NFL has five gas based Ammonia-Urea plants viz.
Nangal & Bathinda plants in Punjab, Panipat plant in Haryana and two plants at Vijaipur at District Guna, in Madhya
Pradesh. Company has fast-tracked its capex plans by setting up a bentonite sulphur plant of 25000 MTPA capacity
at Panipat unit which got commissioned in December 2017.It is setting up an 8000 MTPA plant to manufacture
Muriate of Potash (MoP) from subsoil bitterns at Little Rann of Kutch, Di-nitrogen tetroxide (N2O4) plant at Vijaipur
unit on Built Own Operate & Supply basis (BOOS) for ISRO, R&D initiative with M/s IARI, New Delhi to design &
develop an applicator & logistic arrangement for application of Urea Ammonia Nitrate (UAN) which is envisaged to
be manufactured at Nangal unit. Also, it is setting up Agro Chemical plant at Bathinda for production of farm
insecticides and seed processing plants at Indore, Bathinda and Panipat.
During FY18,India has produced Urea production of 24.0 mn tons and imported 6.0 mn tons to meet the total
consumption of 30 mn tons of Urea in the country. Under vision 2022 of New India, all efforts are being made to
revive the closed Urea plants in the country in a time bound manner to make the country self-reliant in Urea by
2022 which is likely to be beneficial for the company. Further, waiver of loans of farmers and technological
interventions like e-trading of agriculture produce by various state governments are likely to make favorable impact
in the growth of agriculture economy. Also, company is likely to benefit from various reforms/initiatives undertaken
by Government of India. Recapitalization of bonds in PSU banking industry, nutrient based transfer subsidy, direct
benefit transfer are some policy reforms through which company is likely to benefit.
Almost 80% of company’s revenue is derived from Urea production and prices of the same are on an upsurge in
global markets since July 2016 which augurs well for the company. At current market price, the stock is trading at
P/E multiple of 6.0x after its Dec 18 TTM standalone earnings.

Budgetary Proposals
• Launched PM-KISAN program to provide Rs6,000 per annum directly in the hand of small and marginal farmer
having land holding up to 2 hectares.
• An estimated expenditure of Rs75,000 cr per year to be implemented retrospectively from Dec 2018 onwards.

13
 Interim Budget – FY 2019-20

Container Corporation of India Ltd. CMP: Rs 658.7 | Target: Rs 805.0

Container Corporation of India Ltd. (CONCOR) is a Navratna Public Sector Undertaking who commenced operations
from November 1989 taking over the existing network of 7 ICDs from the Indian Railways. From its humble
beginning, it is now an undisputed market leader having the largest network of 72 terminals in total as on March
2018, of which 14 are pure EXIM terminals, 36 are combined container terminals, 12 are pure domestic terminals
and 1 RCT. In addition to providing inland transport by rail for containers, it has also expanded to cover
management of ports, air cargo complexes & establishing cold-chain. CONCOR is committed to providing
responsive, cost effective, efficient and reliable logistics solution to its customers.
Company is entering into 3PL segment for which it has already identified ~81 nodes to an additional ~20 nodes are
likely to be added. CONCOR is well placed to tap into the 3PL segment, given its highly competitive cost structure
and large warehousing potential. Company has over 28 years of presence in organizing efficient rail movement of
containers & highly professional terminal management and operations of ICDs, combined with the experience of
coordinating with Indian Railways, customs and other central & state government agencies which suggests the
ample business experience and skilled workforce which company possesses.
Ahmedgarh (Punjab), Visakhapatnam (Andhra Pradesh), Tihi (Madhya Pradesh), Jharsuguda (Odisha),
Krishnapatnam (Andhra Pradesh) were the 5 multi modal park logistic facilities which were developed during FY17
which might serve as major growth driver for company going ahead. Company’s market share has slightly
improved with a total market share of ~74% at the end of FY18 suggesting a monopoly which it possesses. The
quarterly numbers since last few quarters have been growing in high double digit except for Q4FY18. It enjoys a
debt free status and generates moderate return ratios. At current market price, the stock is trading at P/E multiple
of 27.7x after its Sept 18 TTM standalone earnings.

Budgetary Proposals
• Budgetary announcements like rise in railway capital budget from Rs56,000 cr to Rs64,587 cr and Railway
Operating Ratio will improve from 98.4% (FY17-18) to 95% (FY19-20).
• Container transportation permitted on Brahmaputra river which are likely to be a positive for the company.
• Total expenditure increased from Rs24.57 L crore to Rs27.84L crore for FY19-20 (BE).
• Budgetary Capital expenditure is estimated to be Rs 3,36,292 crore for FY19-20 (BE).

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 Interim Budget – FY 2019-20

PNB Housing Fin. Ltd. CMP: Rs 922.4 | Target: Rs 1050.0

PNB Housing Fin. Ltd is a leading housing finance company providing housing loans to individuals and corporate
bodies for purchase, construction, repair and upgradation of houses. It also provides loans for commercial space,
loan against property and loan for purchase of residential plots. The company is promoted by Punjab National Bank
and has over 3 decades of experience in housing finance market.
The company since its operation has AUM of +Rs70k and classified amongst top five HFCs in India. The loan book of
the company is well diversified with home loan-70% and balance in LAP and construction finance etc. The company
has +100 branches in 60 cities. PNB Housing has registered excellent growth of 52% CAGR in disbursement, while
asset based clocked 52% CAGR in last three years.
The asset quality is excellent with <0.5% GNPA and NNPA in spite of rapid expansion in balance sheet. The company
diversified liability franchisee comprising of NHB refinancing, CP, NCD, Bank loan, Deposit and direct assignments
backed strong credit rating. The company has excellent margin, spread, RoA at 3.26%, 2.27% and 1.5% respectively.

Budgetary Proposals
• GST Council to appoint a Group of Ministers to examine and make recommendations for reducing GST burden
on home buyers.
• Under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is extended for one more
year for all housing projects approved till 31st Mar 2020.
• Extend the period of exemption from levy of tax on notional rent on unsold inventories from one year to two
years.
• Curtailed fiscal deficit target of 3.4% to help reducing policy rates.

Sobha Ltd. CMP: Rs 478.5 | Target: Rs 550.0

Sobha Ltd. is a Bangalore based leading real estate developer. The company primarily focused on residential and
contractual projects.
The Company has exceptional track record since its inception in 1995 and has completed 129 projects across 26
cities entailing 96.48 million sqft. The company has over 3200 talented professionals and rated as no.1 brand.The
company currently executing 8.59 million sqft of saleable areas across eight cities in addition to Rs2,267crore
worth of contractual orders in hand. The company presently has 2,469 acres of land bank entailing total
development potential of 211 million sqft.
The Company derived 68% of revenue from Bangalore market as on Sept 2018. Of the total 48.7 million sq.ft.
saleable areas completed, 75% belongs to the Bangalore while going ahead, in under construction projects the
share of Bangalore market stands at 54%. The company has strong financial with D/E ratios <1x with manageable
working capital. The EBITDA margin is +20% while return ratio profile is +18%.

Budgetary Proposals
• GST Council to appoint a Group of Ministers to examine and make recommendations for reducing GST burden
on home buyers.
• Under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is extended for one more
year for all housing projects approved till 31st Mar 2020.
• Exemption from levy of income tax on notional rent on a second self-occupied house.
• Extend the period of exemption from levy of tax on notional rent on unsold inventories from one year to two
years.
• The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from
investment in one residential house to two residential houses.

15
 Interim Budget – FY 2019-20

Insecticides (India) Ltd. CMP: Rs 589.7 | Target: Rs 695.0

Insecticides (India) Ltd. is India’s leading and one of the fast growing Agro chemicals manufacturing company. The
company’s primary business is manufacturing and distribution of various types of insecticides, weedicides,
fungicides and PGRs for all types of crops and household. IIL is focussed to develop processes for new
environmentally friendly formulations. It brings up international talent and world class R&D facilities to improve
existing process.
IIL has a strong product portfolio and a PAN India presence. It has +120 formulation products and 15 technical
products. Its brand umbrella “Tractor brand” is a household name when it comes to Indian farm sector. IIL’s brands
are rapidly emerging as most trusted crop protection tools in Indian agriculture sector. Its product basket consists
of formulations, technical and household products.
IIL has strong collaborations and tie ups with leaders in the international market to provide the highest quality
products and services to the farmers. It has state of the art In House Research and Development Centre which is
equipped with latest equipment and instruments. The company has grown at a CAGR of 11.7% in terms of its
revenue in the last five years. It also generates return of +15%. The company has strong financials with D/E ratios
<1x and manageable working capital.

Budgetary Proposals
• Government’s New India 2022 initiative to double farmers income.
• Around +12 crore families will benefit Rs75000 crores wef December 2018 which will boost the revenue of
agrochemical companies.

16
 Interim Budget – FY 2019-20

Apollo Hospitals Enterprise Ltd. Buy: Rs 1341.3 | Target: Rs 1465.0 | SL: Rs 1275.0

Weekly Open High Low Close S3 S2 S1 PIVOT R1 R2 R3

APOLLOHOSP 1287.0 1357.9 1254.0 1341 1174 1214 1278 1318 1381 1422 1485

Apollo Hospitals Enterprise Limited has made bullish "Piercing Pattern" in weekly chart.
The counter has closed above Swing high of 1329.85, the momentum indicator RSI has given positive crossover in
the weekly chart which signifies positive breath in the counter.

17
 Interim Budget – FY 2019-20

Escorts Ltd. Buy: Rs 678.0 | Target: Rs 746.0 | SL: Rs 644.0

Weekly Open High Low Close S3 S2 S1 PIVOT R1 R2 R3

ESCORTS 704.95 709.00 630.25 678 557 594 636 672 715 751 793

Escorts Limited has been trading in upward sloping Price channel in weekly charts.
The counter is taking support of 20 period Simple moving average and has recovered from upward sloping price
channel support line with rise of volumes. The counter has closed above Swing high of 649.60.

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 Interim Budget – FY 2019-20

Britannia Industries Ltd. Buy: Rs 3251.0 | Target: Rs 3555.0 | SL: Rs 3099.0

Weekly Open High Low Close S3 S2 S1 PIVOT R1 R2 R3

BRITANNIA 3210.5 3286.0 3131.0 3251 3004 3068 3159 3223 3314 3378 3469

Britannia Industries has been trading in higher tops and higher bottoms with rise in volumes which suggests strong
up thrust in the upcoming months.
Moreover, the momentum indicator RSI has given positive crossover in the weekly chart which signifies positive
breath in the counter.

19
 Interim Budget – FY 2019-20

Derivatives Strategies & Calls

BUY: DABUR Future: Rs453.5 Stop Loss: Rs445.0 Target: Rs472.0

BUY: EQUITAS Future: Rs125.3 Stop Loss: Rs120.0 Target: Rs135.5

HeroMotoco Strategy:
Lot Avg. Max Profit Max Loss
Scrip Buy / Sell Range BEP
Size Price (on Expiry) (on Expiry)
HeroMotoco 2800 Feb Call 200 Buy 1 lot 75 77 76
Rs.13200 Rs.-6800 2834
HeroMotoco 2900 Feb Call 200 Sell 1 lot 41 43 42

DLF Strategy:
Lot Avg. Max Profit Max Loss
Scrip Buy / Sell Range BEP
Size Price (on Expiry) (on Expiry)
DLF 170 Feb Call 2,600 Buy 1 lot 7.2 7.4 7.3
Rs.17420 Rs.-8580 173.3
DLF 180 Feb Call 2,600 Sell 1 lot 3.9 4.1 4

20
 Interim Budget – FY 2019-20

Currency Derivatives Strategies & Calls

The Indian rupee weakened ~0.50% to Rs71.55 per US dollar compared to the pre-budget level of 71.18 amid
surging government bond yields on weakness emanating from local equities and debt as the government set
slightly wider than expected fiscal deficit target for next fiscal year. To stem volatility after budget, the Reserve
bank of India intervened due to sharp rise in the spot market. In absence of Finance Minister Arun Jaitley, Union
and Railway Minister Piyush Goyal presented his final interim budget for 2019-20 in the Parliament on 1st Feb 2019
before Loksabha elections. The Government revised the fiscal deficit target to 3.4% of GDP for 2018-19, indicating a
deviation from the path of fiscal consolidation. The government had earlier pegged fiscal deficit target at 3.3% of
GDP for the financial year 2018-19. The Finance Minister announced the gross borrowing at Rs7.1L crore with net
borrowing pegged at Rs4.73L crore for FY20. Gross borrowing of Rs6.4-6.6L crore from the bond market in the fiscal
year 2019-2020 was expected compared to Rs5.35L crore in the current fiscal while the net market borrowing is
expected to increase to Rs4-4.2L crore in FY20 from Rs3.9L crore in FY19. The major emphasis of this budget for
FY20 is on growth of rural farmers and cutting taxes of middle income class earners that aimed a perfect balance
between the upliftment of the rural economy as well as incentivizing the high spending urban middle class. Again
revenue from the new GST is well below government's target.

The India’s 7.26% 2029 government bond yield soared to 7.3754% compared to previous close of 7.28% as the
government increased its fiscal deficit target and borrowing programme. In the previous Union Budget for FY18-19,
the Indian rupee fell to one week low of Rs 63.91 per US dollar amid weakness of local equities on introduction of
LTCG tax and higher than expected fiscal deficit target of 3.3%.

The dollar index swung between gains and losses around 95.50 as the US Non-farm payrolls jumped to 304,000 jobs
last month to the highest levels since Feb 2018 but unemployment rate soared to seven month high of 4% from
3.9%, below Fed’s targeted rate. Earlier dollar has incurred losses against its rivals as the Federal Reserve left
interest rates unchanged at 2.5% and vowed to keep the brakes on further rate hikes amid concerns about slowing
growth and subdued inflation.

In the near term, the Indian rupee is expected to recover based on domestic equities’ performance ahead of
Loksabha elections andmovement of government bond yields on post budgetary developments. Secondly, it will
take cues from external factors like US-China trade tensions, Brexit political roller coaster, US jobs report and Italy
recessions fears.

Currency Option Strategy:

Avg. Max Profit Max Loss
Scrip Lot Size Buy / Sell Range Status
Price (on Expiry) (on Expiry)

USDINR 71.50 CE 1000 Buy 10 lot 0.1700 0.1800 0.1750 Unlimited

Upside or Rs.-3800 -
USDINR 71.25 PE 1000 Buy 10 lot 0.1900 0.2000 0.1950 Downside

Trading calls: Intra-day

Scrip Lot Size Buy / Sell CMP Stop loss Target Status

JPYINR Feb 1000 Buy 1 lot Rs 65.7175 Rs 64.80 Rs 67.00 -

21
 Interim Budget – FY 2019-20

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 Interim Budget – FY 2019-20

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