Daily Voice | This investment advisor is bullish on PSU stocks, tourism space post budget; here's why

Yes I am. Governments have monopolistic access into markets and they control policy which can disproportionately favour PSU if they are well run. We can see this example in Australia, where almost 70 percent of employment is in PSU there.

Firstly, PSUs have a deeper network, lower costs and structural access into capex programs of government. This means, given higher capex outlays, some of the M1, M2 money supply will flow through PSU which will give them access to cheap deposits.

Are you happy with the budget? What is your rating for the budget on 1-to-10?

Instead of next year, this budget talks about 50 years ahead when India should be a developed country, to 300 years ahead when GIFT city will be considered the portal to world trade. Hence this exudes confidence in the incumbent administration where they want to make decisions that have an effect beyond their lifetime let alone tenure.

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I think I would have to give it 10 as this budget exudes the confidence of the incumbent government not to give into populist measures in a pre-election year. This amount of confidence in policy certainly bodes well for FPI flows which are likely to come in apart from technical flows in terms MSCI weight changes and inclusion of Indian government bonds in JP Morgan bond index.

Few note-worthy things are 40,000 wagons upgrade is akin to a complete auto spares market being created in terms of sheer volume. Each wagon has 70+ seats compared to car with 5, that easily means that total volumes in seat, upholstery, electricals etc required for this is almost the size of a mini automobile market.

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Is the rally done in the capex and railway stocks for the time being?

No, I think there is more expected given that we are just getting started. There are many structural benefits of railways. Lesser accidents improve outcomes for insurance companies, lesser range anxiety for EV (electric vehicle) as public long distance transport by rails will replace other kinds of options to name a few.

Are you gung-ho on the hotels and airline stocks after the budget?

Yes given the focus on tourism both in terms of employment opportunity, brand building of Bharat and also entrepreneurship, this sector will remain a priority sector for future governments.

Is it the right time to do investment in fixed income instruments given the expected rate cuts?

In an election year it is hard to foresee rate cuts as it directly impacts small savers, especially in the senior citizen category who constitute a significant portion of vote bank. Hence, I don't foresee a rate cut, but certainly inflation will slide towards the target of 4 percent eventually, maybe not so much before the elections. Hence, I would say equity still is our preferred asset class for the longer term especially small and micro cap stocks.

Also read: India can sustain current levels of growth with or without private capex: Finance Secretary

What is your take on the Paytm after the RBI imposed major business restrictions on Paytm Payments Bank?

This is the challenge of a first mover in an emerging economy where they built a business where regulations were forming and they could not perhaps pivot to new rules fast enough. That said, I don't think the lapses were part of their expansion strategy and it's unfortunate that the regulatory action was severe.

What is the more disappointing part in the budget?

Maybe they would have tweaked the exemptions related to health and education to allow for higher actual costs.

Do you think NBFCs will find it difficult in terms of money making, compared to PSU and private banks?

Yes, as there is hardly any regulatory arbitrage left in NBFC giving advantage to PSU banks over NBFC. What needs to be see is how quickly NBFC figure out more regulatory arbitrages that gave them their initial growth.

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