Mohit Nigam is the Head – PMS at Hem Securities
Mohit Nigam, Head – PMS at Hem Securities, says the current decline in the market from the top ought to be seen as a healthy correction and can be a good opportunity to accumulate quality stocks. The benchmark indices fell 3.5 percent in the passing week.
Finance Minister Nirmala Sitharaman will present her fourth Union Budget on February 1 this year. “The world is facing many supply-side issues and India can turn those challenges into opportunities, so the government may focus on such areas in the upcoming Budget,” says Mohit Nigam.
He further says the metal industry is also struggling with some surging input cost, this year’s Budget may announce some packages for this industry or an announcement regarding reduction in custom duty on aluminium, steel and copper would give a boost to the metal industry.
Market corrected nearly 4 percent in the last four sessions of the current week. Do you think the market can break 17,000 or fall more than 3-5 percent next week, just before the Budget 2022?
The major reason behind the current fall in the Indian Benchmark Indices can be attributed to global markets as losses in the Indian markets are mirroring the fall in the US equity markets, FIIs selling and the assumption regarding the liquidity normalisation by RBI in the coming Monetary Policy Meeting. The Union Budget remains the most important trigger for market movement in the coming days.
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Notably, in the last three years, the market started to correct between January 15 and January 20, before witnessing a post-Budget rally and we expect the same this year. Market corrected nearly 4 percent in the last four sessions of the current week and we think that this is as far as the correction may go and we can expect to see benchmarks to stage a rebound in the days ahead of the Union Budget.
The market sentiment is currently positive, mainly on account of better performance from top IT companies and Banks. This decline in the market from the top ought to be seen as a healthy correction and can be a good opportunity to accumulate quality stocks.
What could be surprising elements, if any, in the Union Budget?
Some of the surprising elements in the Union Budget may be:
a) Tax relaxations on capital market instruments related to long term capital gains tax, taxation of foreign investments and taxation on long term debt instruments.
b) Lowering fiscal deficit targets
c) Any announcement related to the divestment pipeline for the next year.
What could be key announcements that would lift the market sharply on the Budget day?
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FM Sitharaman will present her fourth Union Budget on February 1 this year. With the new variant of coronavirus entering India, the economic activity is likely to be adversely affected this year. That will reflect in the stock markets too which have turned volatile ahead of the annual event. In the last financial year the government took initiatives like the Production Linked Incentive (PLI) scheme and relaxation under the GST regime to promote India becoming a manufacturing hub. Last year’s Budget headed in the right direction and the market is looking towards a pro-growth Budget just like last year.
The world is facing many supply-side issues and India can turn those challenges into opportunities, so the government may focus on such areas in the upcoming Budget. The metal industry is also struggling with some surging input cost, this year’s Budget may announce some packages for this industry or an announcement regarding reduction in custom duty on aluminium, steel and copper would give a boost to the metal industry.
The Infrastructure sector has a high multiplier effect on the economy, so some raise in allocated funds in this sector can be expected in this year’s Budget. COVID-19-affected industries like education, hotels, tourism may expect some concession on capital expense or relaxation in terms of easy access to loans or tax reduction to survive in the coming year.
Do you think the government will announce a growth-oriented Budget or populist (especially ahead of state elections) Budget on February 1?
We expect the Budget to be less of a populist one and more of a growth-oriented one as this will shape up India’s next leg of growth. This Budget might set the pace of growth for this decade, and pave the way for India to march towards its ambitious goal of becoming a $ 5 trillion economy by 2025. As a recovery from the pandemic shock, expect that the government will continue to spend more to aid the recovery and put India back on a trajectory of higher growth.
The PLI (production-linked incentive) scheme introduced in 2020 served as a game-changer for many industries that were hitherto hesitant to invest in new technologies due to the high cost of capital in this Budget announcement of various PLI schemes covering various sectors will speed up India’s economic growth. We are looking forward to more promising announcements from Budget 2022 benefiting all the stakeholders representing various sectors of economy.
Adani Wilmar, the second IPO of the year 2022 will open for subscription next week. What should investors do with the Adani Wilmar IPO and is it overpriced at current issue price?
Edible oil major Adani Wilmar will open for subscription by the public on January 27 and will close on January 31 to raise up to Rs 3,600 crore through an initial public offer (IPO). The issue comprises fresh issue of new equity shares of face value of Re 1 with a price band of Rs 218-230 per share. Adani Wilmar is a 50:50 joint venture between Adani group and Singapore-based Wilmar group.
Click Here To Read All IPO Related News
It is one of the few large FMCG food companies in India to offer most of the essential kitchen commodities for Indian consumers such as edible oil, wheat flour, rice, pulses and sugar which account for approximately 66 percent of the spend on essential kitchen commodities in India. “Fortune”, their flagship brand, is the largest selling edible oil brand in India. It’s portfolio of products spans across three categories: (i) edible oil, (ii) packaged food and FMCG, and (iii) industry essentials. The company is the largest player in branded refined soyabean oil having a market share of 28 percent followed by Ruchi Soya.
As of March 31, 2021, the firm’s Refined oil in consumer packs (“ROCP”) market share in the branded edible oil segment was 18.3 percent, making it the dominant No. 1 edible oil brand in India. In the industrial essentials segment, the company is the largest manufacturer of basic oleo-chemicals, stearic acid, and glycerine. It’s also one of the largest exporters of oleo-chemicals in India. Additionally, the company has a strong distributor network which is located in 28 states and 8 union territories in India. It caters to more than 1.6 million retail outlets through this network. The company intends to use the IPO proceeds to fund capital expenditure for the expansion of existing manufacturing facilities as well as developing new units. A part of the fund will be also used to repay debts and fund strategic acquisitions and investments. With strong fundamentals, leadership in edible oil and packaged foods and a diversified product portfolio, the company is a good bet for listing gains as well for long term investment.
Will FIIs remain net sellers in the first half of 2020 given the risk of rate hikes by Fed and rising inflation concerns?
Continuous FII selling has been witnessed in Indian markets amid rising inflation and elevated bond yield. After years of loose monetary policy and almost Nil interest rates, most central banks are now looking to tighten liquidity. With the US Fed focusing more on CPI inflation, and also doubling the taper to $ 30 billion per month, the US treasury yields are likely to inch upwards going forward.
Hence, the selling trend may not change immediately and FII could continue to be net sellers in the first half of 2022. However, over a period of time, India should see positive FII inflows, given the strong domestic macros and robust earnings growth outlook.
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