Even if no reforms are announced, it will still be a good budget
Manufacturing is one of the sectors that will be in the limelight in the finance minister’s speech. It has been a key sector for the government over the last couple of years.
All eyes are on the upcoming Union Budget. Markets have been bleeding from the last couple of days and any positive news from the government may boost investors’ sentiment. Anuj Jain, Co-founder and Research Head of Green Portfolio, says even if the government doesn’t announce any reforms, on February 1, it will still be a good budget. “The ‘Indian Economic Growth Engine’ is already on a high-speed track, just don’t interfere with it.”
Jain believes manufacturing is one of the sectors that will be in the limelight in the finance minister’s speech. It has been a key sector for the government over the last couple of years and PLI (production linked incentive), Aatmanirbhar Bharat, and Make in India have all been the brainchild of this.
What announcements by the finance minister are likely to lift the market sentiment on the budget day?
We are expecting some populist decisions keeping in light upcoming elections. The government’s guidance on the economy will be something to look out for. Even if freebies are given in the budget, I won’t criticize it till the time it does not interfere with the ‘Indian Economic Growth Engine’. We should also keep in mind that when a poor person is handed over cash he spends most of it, and the rich will just save it as all his needs are already met. In economics, it is called ‘propensity to consume’. So my suggestion, if it’s going to be a populist budget, do it efficiently.
Budget is an overhang on the markets, no matter what announcements are there, the market should move up post-budget. Of course, barring global factors.
Do you think the Union Budget 2022 would be a game changer and why?
All eyes are actually on the Budget right now, markets have been bleeding from the last couple of days and any positive news from the government can boost investors’ sentiment. Regarding expectations from the budget, we believe last year’s budget was good enough and even if they don’t announce any reforms, in this budget, it will still be a good budget. The ‘Indian Economic Growth Engine’ is already on a high-speed track, just don’t interfere with it. The government does not have much leeway this time as big elections are there and the budget has always been a tool to influence elections.
What are the sectors to focus on as we approach Budget day?
Also read – Budget 2022 | Expectations rising for some consumption-boosting measures as we approach important state elections
Manufacturing has been a key sector for the government over the last couple of years and PLI (production linked incentive), Aatmanirbhar Bharat, and Make in India have all been the brainchild of this. So we believe manufacturing is one of the sectors that will be in the limelight again. Further, Renewable energy may see some impetus in this budget. We are expecting some actions on inverse duty structures which is putting, in many cases, Indian products in a disadvantageous position.
Have you spotted any themes that have strong futures but corrected sharply in the recent fall?
Chemical and Pharma have been laggard in last 6-9 months. We strongly believe that they are now ready to catch up. Even cement has not performed well in the recent past. Given India’s ambitious goals of Infra development, Cement should be the direct beneficiary.
What is the major reason behind the current sell-off – Fed stance, FII selling, inflation concerns, Union Budget or earnings? Do you expect more volatility in the market in the rest of 2022 given the rising expectations for more rate hikes by Federal Reserve and the end of easy liquidity soon?
Also read – Budget 2022: Does public opinion matter?
To be honest, all these factors along with 3rd wave of Covid are currently at play to drag down the markets. However, we believe that these factors have been overhyped, which frequently happens in stock markets. If my company is fundamentally strong and the overall economy is good, how much these factors could affect my wealth in long term? I would say, negligibly.
Volatility may continue till March when the Fed will decide on rate hike and results for Q3 would be out. But our advice would be to invest in quality stocks which have seen a sharp fall recently. We see a very good opportunity in this fall.
Do you think overall December quarter earnings performance, so far, is satisfactory or has raised any concerns?
For our holding’s, earnings are majorly positive so far. So we are satisfied with the Q3 earnings as of now. However, in several industries like cement, steel, the impact of high power cost is very much visible. They may remain beaten down in this volatile time. However, these are short-term phenomena. We are looking for good shares beaten down disproportionately.
Also read – Key Policies from Budget 2021 To Know Before the Upcoming Budget Session
In the recent correction, 2021 IPOs including RateGain, Shriram Properties, Star Health, Paytm, SJS Enterprises, PB Fintech, Fino Payments Bank, Aditya Birla Sun Life AMC, Nuvoco Vistas Corporation, CarTrade Tech, Krsnaa Diagnostics, Windlas Biotech, Glenmark Life Sciences, KalyanJewellers, and Suryoday Small Finance Bank corrected sharply in double-digit. Should one buy all these stocks now and why? Or should one wait for more downside? And are these stocks now available at attractive valuations after recent correction?
We at Green Portfolio, don’t take positions just because, something saw significant correction. Rather, we focus on the quality of stock that it brings with itself and the level of valuation it is trading on. If something meets these criteria, we enter the stock. To put it differently, purest gold of 24 carat – would you pay 1 lac for 10 gram? No, as it has value even if it is purest in the world.
About recent IPOs, there are shares valued over billions of dollars, where we don’t see the value. The valuation, at which some of the IPOs have come, proves the incessant and nonsensical euphoria. Our PMS has not applied in any IPO of the year 2021.
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