InCred maintains cautious stance on Indian equities, shares top stock picks post Budget 2025

Brokerage house InCred Equities has maintained its cautious stance on the Indian equity markets. It expects the Nifty index to move sideways with a downward bias and has retained its year-end target of 23,260.

The brokerage highlighted a preference for large-cap stocks over small-cap and mid-cap counterparts.

The fiscal policy's focus on increasing disposable income to drive GDP growth recovery is seen as a step in the right direction. However, InCred emphasised the need to closely monitor consumer behaviour to assess whether this policy will translate into higher spending, along with the Reserve Bank of India's (RBI) response to potential inflationary pressures.

The firm remains selective in stock recommendations, favouring companies such as Britannia Industries, Hero MotoCorp, Maruti Suzuki, and Havells India. Meanwhile, the downward trend in infrastructure spending has led to a REDUCE rating on NCC.

Here's a list of stocks in its model portfolio

Fiscal Consolidation Continues

InCred noted that the focus on fiscal consolidation remains intact in the Union Budget for FY26, with a projected 40-basis point reduction in the fiscal deficit to 4.4 per cent of GDP. This brings the deficit close to pre-COVID levels, which averaged 4.3 per cent during FY10-19. The firm highlighted that the improved quality of fiscal deficit, achieved through subsidy reductions, is a positive sign. However, InCred pointed out that the government's expectation of a 14 per cent growth in tax collections appears ambitious.

Net market borrowings are set to rise by 7 per cent year-on-year, while capital expenditure is projected to increase by 9.8 per cent, largely driven by defence spending. In contrast, the lack of growth in road and railway sector investments is seen as a disappointment. Policy measures such as permitting 100 per cent FDI in the insurance sector, introducing a new income tax code, and providing incentives for the MSME sector are viewed as supportive for long-term economic stability.

Urban Demand Recovery as a Key Focus

InCred stated that addressing the slowdown in urban consumption demand through income tax rate reductions across slabs is a positive development. Lower tax rates are expected to enhance consumer credit ratings, boost discretionary spending, and lead to increased private sector capital expenditure in the coming quarters.

The biggest beneficiaries of tax cuts, according to InCred, include the retail, consumer durables, FMCG, two-wheeler, automobile, and hospitality sectors. Additionally, credit expansion to agriculture and MSMEs is likely to drive loan growth for public sector banks. However, the brokerage cautioned that infrastructure and capital goods sectors could face relative underperformance, while tax reductions for propane may negatively impact gas consumption and distributors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.