For Santosh Kumar Singh, who is the head of research at Motilal Oswal Asset Management Company, the Budget has been a pleasant surprise, with the government worrying less about the fiscal deficit and focusing more on growth.
The chartered account with more than 15 years of experience as financial analyst is excited about the government’s proposal to spend more on infrastructure and privatise public sector undertakings.
If the government delivers on its Budget promises, the upside in the market can be quite high, says Singh in an interview to Moneycontrol’s Sunil Shankar Matkar. Edited excerpts:
Q: What is your reading of the Budget 2021 and is it really a game-changer? Where will you rate the Budget on a scale of 1-10?
The biggest take away from the Budget for me is the departure from traditional thinking by the government and realising that growth is key for all other macroeconomic parameters. I don’t know if I can say it to be a game-changer Budget but it definitely looked like an intent-changing Budget, where the focus was on transparency of data and conservatism in estimation. Also, there was a lot of focus on capex, which is the key for the Indian economy. On all these parameters, the Budget tends to tick almost all the boxes.
Q: Which are the announcements that surprised and hurt you?
The surprise in the Budget was the government expectation of increased fiscal deficit number for a long time and it was a positive surprise. My feeling for some time has been that the government’s focus on fiscal has been at the cost of growth and which has eventually hurt the economy. Also, the government’s intent to push infra spends and privatise PSUs was to an extent a surprise. Didn’t find much which hurt me in this Budget.
Q: Which are the sectors that will benefit the most from the Budget and which are stocks to look at?
I would not get into the stocks but on the sectoral front, given government determination on pushing capex, it should help the infrastructure and capital goods stocks. Also, the announcement of changing the legislation to privatise PSU banks is a big positive step and should help the PSU banks.
Q: What will be your investment strategy post- Budget and what is your advice to retail investors? What is your view of the market?
Markets after the current rally may take a breather as the focus would be on execution of what has been promised. However, we may see significant broadening of the performance in the market. We have always thought about the market from a longer term perspective and believe this is my advice to the retail investors that one should not think from the near-term price perspective. If the government is able to deliver on what they have said then the upside in the market can be quite high.
Q: What should be the portfolio allocation in terms of sectors after the Budget? Which sectors are to be avoided?
I would think that financials should remain one of the key sectors as there were many announcements in the Budget that can help clean the book of the companies. IT would remain a key sector, as the global macro is positive for them and digitisation would be at the forefront of any growth initiative.
Q: Should one start focusing on the auto space after the Budget, scrappage policy and January sales data?
I would be positive on the auto segment from a longer perspective and this is not due to the scrappage policy or January sales but if the income levels increase, demand for personal mobility would go up.
Q: Should one stay more with midcap-smallcaps compared to largecaps?
If the growth starts to pick up, then mid and smallcaps may start to do well compared to the largecaps. However, it would also depend on the sectors as my view is in certain cyclical sectors, largecaps are still to see significant rerating and if the earnings growth starts in those sectors, we may see much better risk reward in largecaps.
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