Cap goods, engg to gain this Budget: Man Financials

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As the count down to Budget 2007 begins, Vasudeo Joshi, Head of Equity Research at Man Financials shares his expectations from the Finance Minister.

 

He expects a high level of volatility in the markets post budget. According to him, infra related stories like capital goods and engineering will stand to gain.

 

He also feels that the tourism sector will benefit on the fiscal side. He believes that the balancing of customs duty will see OMC and upstream companies benefit.

 

He says that the real estate arena is witnessing more deals that the construction space.

 

Excerpts from CNBC-TV18's exclusive interview with Vasudeo Joshi:

 

Q: Your analysis starts a perspective on what has happened pre-Budget and post-Budget in the last many years and that tells you that if it runs up till the Budget, then it probably won't after the Budget.

 

A: That is true, I think if you look at the last 17 Budgets then typically the volatility is higher post-Budget scenario and if you look at the number of positive moves before which get converted into negative moves after the Budget, I think that that would be more or less equally split. So from that perspective, I think on the expectations if the market runs before the Budget then there is a possibility that you may not have significant performance post-Budget.

 

Q: Let us break it down in terms of sectors that you expect something from. Oil & gas - do you think might get some positives from the Budget this time?

 

A: The sectors, which will basically do well or rather which we expect to do well post-Budget are basically infrastructure-related stories. So you have the construction sector, capital goods, engineering - these are the sectors which are likely to do well because typically the higher growth rate that we are expecting from the economy over the next 4-5years or so that is more than 8%. And that can happen only if significant investments are done in the economy.

 

That is possible only if the number of projects, as they have planned in the 11th plan get rolled out over a period of time and the prime beneficiaries of that are going to be basically the capital goods companies. So from the overall perspective of the Budget, capital good sector will benefit.

 

The other stories would be basically the agriculture related stories because there is going to be significant stress and importance given to the increase in the plan outlay for agriculture and irrigation. Now if that happens, then typically you have the stories which will benefit from that like in the pumps manufacturing sector. Also there will be stories which are from direct link to the agriculture equipment like Mahindra and Mahindra or Jain irrigation, on the pump side, you will have Kirloskar Brothers Ltd or something like that. So agriculture is going to be another theme of this Budget.

 

The third theme will be basically the story is related to the employment generation. Now one such sector could be the Tourism sector, where you will see that some amount of fiscal incentives will be given in terms of tax benefits, tax holidays or whatever, so the tourism industry's latest stories can also do well.

 

As far as the oil and gas sector is concerned, we believe that there will be a certain amount of rebalance into the customer duties for the oil and gas sector. So from that perspective, basically the upstream companies and the marketing companies would be the beneficiaries. So some amount of positive sentiment for those stories is also expected from the Budget.    

 

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