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Budget 2022: If we focus on growth, fiscal consolidation will be faster, says White Oak Capital’s Aashish Somaiyaa

Somaiyaa urges the team of Union Budget to focus on maximising investments into the economy, even though he says, the Budget will be a non-event

December 27, 2021 / 01:29 PM IST
Aashish Somaiyaa, White Oak Capital Management

Aashish Somaiyaa, White Oak Capital Management

It’s all about growth right now, believes Aashish Somaiyaa, CEO of White Oak Capital Management. The company provides investment management and advisory services for Indian equity assets of over $5.6 billion.

Sharing his wish list for the Union Budget 2022 during an interaction with Moneycontrol, Somaiyaa urges the team of Union Budget to focus on maximising investments into the economy, even though he says, the Budget will be a non-event as the government announces big-bang reforms throughout the year.

He remains bullish on private banks which, according to him, will play a crucial role in the path to economic growth. Here are excerpts from his interview:

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Do you expect a big bang Budget ahead?


By now, we have seen multiple cycles of the government. It is evident that no one waits for the Budget to make big-bang announcements and, we see reforms momentum alive all year round. To that extent, apart from budgetary numbers and defining the focus of budgetary allocations and resource raising, one may expect it to be a non-event.

Which sectors do you think will be in focus?

Globally, there is a quest for growth at scale, and India finds itself in a unique position to take advantage of this. I hope the Budget focuses on maximising investments into the economy from the government as well as the private sector. While we have busted the FRBM Act and its related deficit numbers due to multiple reasons, post COVID, we find ourselves in a sweet spot where deficit is not the top-most consideration. Instead, the focus is on rapidly providing growth avenues. We need to capitalise on this situation.

Check out all the Budget-related developments here

What’s the one thing you would like to tell the Budget team?

We have elbow room on the fiscal front after a long time and we can consider a longer path to normalisation. If we focus on growth, fiscal consolidation will happen faster, but if we prioritise fiscal consolidation, we will end up losing a God-sent opportunity for healthy and lasting growth. This appears to be an option because the external front, and especially foreign reserves, provide a very high cushion unlike in the past.

Although Air India divestment is done, we haven’t heard much about the government’s other divestment plans. How do you think it will pan out?

While it is difficult to comment or forecast, since we do not know the status of each of these initiatives, we do hear positive noise on the LIC listing. The government has clearly shown positive intent in this area and we should not forget how difficult the last two years have been on the economic front.

Also read: Budget 2022: Fiscal support crucial in deciding India’s growth trajectory, says JM Financial Institutional’s Dhananjay Sinha

Do you see value in PSUs?

There is no doubt that a lot of state-run companies are valuable, given that they are leaders in their field and in many cases they enjoy monopolistic positions.

We do not see PSU as a sector and would urge investors to view each company on its merit. In recent times, the government has shown positive intent in acting as a responsible promoter where we saw them promptly reversing the fee share on IRCTC bookings, which would have hurt minority shareholders and destroyed value for all shareholders.

Similarly, capitalisation and consolidation of the banking sector is a step in the positive direction. The outcomes for the entire space depends on business dynamics and also minority shareholder friendliness of the promoter like in any other sector and this is something one must watch out for.

How are you playing the banking space?

We have exposure mainly to large-cap private banks and we do see value in these banks. If economic performance has to pick up, it would be on the back of credit growth. In India, the situation is such that there is always a dearth of players to fulfill credit growth in a risk-calibrated sustainable fashion. And if demand for credit were to come back strongly, these top banks would be able to pick-and-choose their opportunity sets and also decide the preferred rate for them to grow at.

Also read: Daily Voice | Expect limited big bang announcements, but some populist measures likely in Budget FY23 given five states elections, says Gautam Duggad of Motilal Oswal

What’s your view on the recent platform company listings like Paytm, Nykaa, PB Fintech and Zomato?

We have seen a lot of debate and discussion on the valuations, which is fair, but we have also seen many investors dissing these IPOs because these companies are making losses and some are even comparing the trend to the tech boom of the late ’90s. It is great to have past experience but it is important to contextualise and draw on the experience with appropriate perspective, otherwise one would end up being coloured by experiences and miss opportunities.

We can clearly see that the role of digital intermediation is rising in our lives and this is yet to reflect in our market capitalisation. One has seen the weightage of tech and internet sectors rising multi-fold in the US and other countries, but in India, the weightage of these has declined over the last 15-20 years even as their role and contribution to the economy has risen.

We do not have FAANG companies in India, so we may not go to as high as 40 percent weightage that one sees for these sectors in S&P500, but we would see a rise in their market cap contribution for sure and it behoves all investors to be open minded while evaluating each company on merit.

Also read: RBI research takes the shine off Economic Survey’s spirited defence of high fiscal deficits

The market has been quite volatile over the past few weeks. The index is about 10 percent off its peak. Do you believe valuations are fair?

Yes, given the significant change in economic conditions, the reforms momentum and quest for growth globally, there is a certain traction in corporate performance. The correction on the frontline index does not reflect the correction across the broader market. The FPI selling is not India-centric, it is a wider risk off trade in which India is swept along with other markets and any correction caused by conditions not specific to India alone must be used as an opportunity to enter the markets at these levels.

In 2021, what do you think took precedence, growth or value?

The year 2021 was very different from 2020 in terms of market performance and contributors to that performance. Each of the past five years have seen high rotation of sectors, themes and market capitalisation contributing to market performance.

When markets rotate, portfolios and portfolio management styles go in and out of favour for no obvious error on part of the portfolio manager. But this is the second nature to markets, managers have to navigate these vagaries, and at the same time, it is futile trying to predict top-down what’s around the corner, what will drive market performance in the next leg.

Amid such heavy rotation in contributors to market performance and futility of the proverbial coin-toss predictions, ensuring consistent alpha is a challenge for any portfolio manager. This is why one sees top-performing managers rotate like seasons almost every few months.

While stock-picking is fund management, fund management is not just stock picking, and a year like 2021 yet again brings forth the importance of portfolio construction.

Also read: Budget 2022: Sectors linked to investment economy to fare well, says Ashish Shanker of Motilal Oswal Private Wealth

Do you think policy tightening by central banks could result in another taper tantrum?

Reversal of QE is an indication of normalisation of economic prospects or at least the first sign that the patient is likely to recover on its own, thereby encouraging doctors to withdraw life support and external intervention. If a patient is recovering, we can’t expect doctors to keep pumping steroids just to satisfy markets’ need for inertia.

In this light, one is not sure how the onset of taper can be bad news, except that the transition will cause some volatility of pulse rates and blood pressure i.e. currencies and external influences on the bond market.

As far as equities are concerned one can expect earnings momentum to rise and multiples to become more reasonable in the near term. But that is how it should be ideally if we want markets to function sustainably and investors to be protected from undue risks.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.

Patricia Hou
first published: Dec 27, 2021 01:29 pm
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