Gurpreet Sidana, Chief Operating Officer, Religare Broking Ltd, is of the view that even though the valuations remain stretched, strong government support, low-interest rates, and a positive global risk sentiment augur well for Indian equities.
In an interview with Moneycontrol’s Kshitij Anand, Sidana, who has about 20 years of experience in the capital markets, said that it is time to look for investment opportunities in the economy-facing sectors but investors should know that they are highly cyclical in nature so allocation should be maintained accordingly.
edited excerpts:
Q) How would you rate the Budget on a scale of 1-5 and why?
A) The government has shown its intent through this Budget that they are geared up to take all the required measures to push the economy back again on the growth track.
The announcements were concentrated on higher spending on social sectors and it was largely on the expected lines. The FM also announced a slew of structural measures including raising the FDI limit for Insurance, set up a Development Financial Institution (DFI) to boost the infrastructure sector, and Asset Reconstruction Company (ARC) and Asset Management Company (AMC) to manage NPAs.
Some bold measures like privatisation of two PSU banks and one insurer and monetisation of assets would surely attract the attention of global investors.
At the same time, the disinvestment plan, which was impacted by the pandemic, rolled over to FY22. On the taxes front, we were not surprised to see the status-quo on the personal income tax front as the government chose an expansionary fiscal policy, which focuses on increasing spending to propel growth.
We believe this Budget has all the ingredients to lay a foundation for economic revival but a lot depends on timely implementation. We thus would rate it 4.
Q) Do you think the government managed its finances, and at the same time delivered a Budget that could boost growth?
A) It was a tough decision for the government on whether to limit the fiscal slippage or focus on increasing spending. And, they decided to choose the latter, which would aid employment generation and also boost overall consumption.
In terms of managing its finances, we believe that the government has done an excellent job by being transparent and also they have been conservative while projecting revenues.
They’ve also shared their intent to return to the fiscal consolidation path by FY26.
Q) Which sectors are likely to benefit the most from the Budget and why?
A) The Budget largely focused on sectors such as agriculture and infrastructure as a majority of the population is directly or indirectly dependent on these sectors for their livelihood.
Needless to say, allied sectors such as cement, fertilizers, real estate, etc. would also witness the growth. Besides, measures announced for the privatisation of two PSU’s and setting of AMC and ARC would support the revival of NPA and in turn, would further strengthen the banking sector.
Q) Which sectors could lose because of Budget proposals and why?
A) The majority of the sectors have something to cheer about from the Budget but we may see some negativity in the insurers due to the discontinuation of tax exception of capital gains from ULIPs.
Also, lower customs duty on the iron and steel sector may impact the metal counters to some extent.
Q) How should retail investors decode the Budget 2021?
A) For investors, this Budget has truly laid the foundation of a strong economic revival in the coming quarters, and the rally, which was restricted to select sectors, will broaden to economy-facing sectors like capital goods, infrastructure, real estate, metals, and cement.
Another positive for equity investors was that the government left the taxes (LTCG/STT/STCG) unchanged which further bolstered sentiments.
Although the valuations remain stretched, we believe strong government support, low-interest rates, and a positive global risk sentiment augur well for Indian equities.
Q) What should be the investment strategy post Budget 2021? Should investors use the dip to rejig their portfolio?
A) We feel that it is time to look for investment opportunities in the economy-facing sectors but investors should know that they are highly cyclical in nature so maintain the allocation accordingly.
They should maintain a balance by keeping/adding stocks from the sectors like FMCG, consumer durables, retail banking, pharma, and IT.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
