Union Budget 2023 can be a blockbuster budget which could give the market and economy the much needed boost, Gaurav Verma of 21G Investment Advisers told Moneycontrol in an interview.
A smallcase manager and the director of the investment firm, Verma, feels that PSU banks, capital goods, and infrastructure are hot themes to look out for in 2023.
With 15 years of experience, he is bullish on PSU banks over private lenders. He feels that big money is now expected to pour in to the PSU banks since they are still discounted as against the private sector, which is currently fully priced.
Verma believes Indian markets will continue to outperform the global market going forward. Therefore, this is the ideal time to act aggressively rather than waiting for a correction, he suggests. Edited excerpts:
Since it is the last full budget of the current government before general elections in 2024, do you expect it to be a populist as well as a blockbuster budget?
Since this is the final budget before the elections, we believe that the government is in a better position to take risks going forward. This is also supported by the fact that the Indian government has recorded mega tax collections in 2022. India’s direct tax collection stood at Rs 14.71 lakh crore as of January 10, 2023, which is +24.58 percent higher than the same time period of the last year, highlighting India's huge consumption capability.
Therefore, we believe that it can be a blockbuster budget that can give the market and economy the necessary boost. As a result, we should all look forward to this.
Which themes do you expect to emerge from the Union Budget 2023?
PSU banks, capital goods, and infrastructure are hot themes to look out for in 2023! Earlier, the government was not in a position to improve PSUs' financial health, but with their recent improved financials, I feel that they have done well, the government's efforts are showing, and they can start off on a longer uptrend from here on.
If one looks at the data, the Nifty PSU Bank Index and the Nifty Infrastructure Index are alone up by +74.67 percent and +7.49 percent, respectively, in 2022. Therefore, we believe PSUs will be in focus.
Similarly, capital goods and infrastructure are two other sectors to be excited about because they are also anticipated to benefit from government expenditure. Therefore, we are highly optimistic about PSUs and infrastructure.
Do you see any valuation challenges for private banks?
No doubt, the Nifty Private Bank Index has alone generated about a +22 percent return in 2022, which has propelled private banks to consistently outperform and be competently managed.
To be honest, the big money is now expected to be in the PSU sector since it is still discounted compared to the private sector, which is currently fully priced.
Any improvement from here can significantly increase their earnings and stock performance. So, if you want to increase your profits, it's worthwhile to take a chance with PSU banks.
Considering the current environment, especially after the market scaled a record high, do you think there's some kind of rebalancing happening in the Indian equities? Also, do you see possibility of Nifty falling by another 5 percent from here on?
As we see, the US’s major indexes -- US S&P 500 and NASDAQ-100 -- have seen a major drawdown in 2022, with S&P 500 falling by -19.44 percent and NASDAQ-100 falling by a staggering -33 percent. In the same year, Indian indices Nifty 50 had gained a +5.69 percent comparatively. Therefore, our Indian market has shown more resilience as compared to the US market.
Having quoted the above, Indian markets have also consolidated over the past year, and assuming the US doesn't enter a deep recession, which is highly unlikely, Indian markets will continue to outperform the global market going forward. Therefore, this is the ideal time to act aggressively rather than wait for market corrections.
Which are the five themes that stand out in 2023?
PSUs, capital goods, infrastructure, sugar, and hotels look good to bet on in 2023. We have already talked about PSUs, capital goods, and infrastructure above. Sugar stocks did go into intermittent consolidation after the previous bull run, but with the government’s firm stand to support ethanol production, the stocks are expected to gain momentum in 2023.
Enough beatings have been taken by the hotel industry since COVID-19 struck the world of tourism in 2020. Having seen three COVID cycles now, people have come out as tourists, and as a result, hotel stocks have seen a massive rally in 2022. We anticipate that the sector will see a consistent rally in 2023 as well.
Do you expect significant buying to emerge in tech stocks after March 2023 quarter? Also, what do you make out of IT biggies' commentaries post-December quarter earnings?
It might stay rangebound for another year due to US headwinds and might pick up in 2024 only if the US economy stabilizes.
Are you bullish on sectors that benefit from lower commodity prices?
Lower commodity prices might trigger a secular uptrend in sectors that benefit from them, as we believe lower prices will stay lower than expected for a few years to come.
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