Vinod Nair of Geojit Financial Services feels the biggest surprise was the strong intention of the government to spend profoundly by openly borrowing from the market without a doubt.
“Banks including PSBs will be the key beneficiaries due to ARC and Privatization plans announced in the Budget 2021. High spending is very positive for cyclicals like Infra, construction, cement and metals. Scrappage is also positive for the Auto sector,” he said in an interview to Moneycontrol’s Sunil Shankar Matkar.
The Head of Research and Chartered Financial Analyst advised to avoid hospitality, tourism and aviation given no special benefits announced in the Budget, despite being heavily hit by pandemic.
Edited Excerpt:-
Q: What is your reading on Union Budget 2021 and is it really a game changer one? Has Budget 2021 met your expectations? What is your rating out of 10?
Yes, it is a dream Budget as it has provided more benefits than anticipated. It is a 10-on-10 for us, the best that can happen during a pandemic period.
Q: What are the announcements in the Budget which surprise as well as hurt you?
The biggest surprise was the strong intention of the government to spend profoundly by openly borrowing from the market without a doubt. The transparency in the fiscal statements and whether it can have an implication on the debt market in the future, was the only uncertainty. But it is understandable that the government has undertaken the responsibility to revive the economy during a weak fiscal period.
Q: What are those key sectors that you would benefit the most from this Budget and what are stocks to look at?
Banks including PSBs will be the key beneficiaries due to ARC and Privatization plans. Insurance due to the increase in FDI will bring new foreign players and re-rate the industry. High spending is very positive for cyclicals like Infra, construction, cement and metals. Scrappage is also positive for the Auto sector. In all these, the best to bet on will be to invest on the sector leaders.
Q: What would be your investment strategy post Budget and what is your advice to retail investors? What is your view on market?
The Budget can give India an upper hand to perform well by lowering the risk of a K shape recovery of the economy, as foreseen in European union. The theme will be to look for companies which will be benefited by a revamp in domestic economy and export opportunity.
Post the Budget, the view for the market has improved but the risk is that it is at peak valuations which can limit the trend in the short-term, and a lot will depend on global developments.
Q: What should be the portfolio allocation in terms of sectors after Budget? Also what should be avoided sectors?
It is advisable to increase exposure in private Banks, PSB, Insurance, Construction, Auto and Metals and avoid hospitality, tourism and aviation given no special benefits announced, despite being heavily hit by pandemic.
Q: What are your expectations on RBI monetary policy scheduled to be held on Friday especially after Budget?
I don’t think RBI will have the urge to do anything more given the optimistic economic agenda in a low interest cycle. RBI may target to reduce the gap in market yield and repo rate and maintain the accommodative stance to reduce rates in the future as inflation eases.
Q: Should one start focussing on the auto space after the Budget, scrappage policy and January sales data?
Yes, incremental sales can be expected in Auto, with a special benefit to commercial vehicles, though a lot will depend on how the scheme will be implemented and the incentive provided. January Auto sales indicates that there is a strong revival in domestic and exports which is sustainable in 2021.
Q: Should one stay more with midcap-smallcaps compared to largecaps post Budget?
Broadly, Mid & Small caps will have the tendency to outperform the largecaps in the medium-term due to robust domestic economy outlook and being attractively priced.
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