What will MOFSL's Raamdeo Agrawal be tracking in the Election Budget?

It's an interim budget. They'll wait for two more months. I think I would look for the expected GDP numbers for the next year. These numbers will all translate into the budget.

One of the investing themes that stock-market veteran Raamdeo Agrawal has been positive about is the capex boom, which is expected to get a further boost in Budget 2024.

In an interview with Moneycontrol, the Chairman and co-founder of Motilal Oswal Financial Services (MOFSL) said, when speaking about the themes he is optimistic about, "You have the capex boom--general capex as well as very specialised ones, railways, defense, infrastructure, etc. All those capex companies will do well."

On the demand-led excitement around the power sector, he said that more capacity will need to be built with the government targeting 24x7 supply. Agrawal believes that will be a multi-year trend.

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"We are also talking about building some more thermal power plants and renewables. In any case, they are roaring and have a huge cascading effect on all sorts of utility companies as well as the capex companies," he said.

He foresees a wave of setting up of power plants with private-capex participation since there will be a demand-led power shortage. "This will be a multi-year trend, as it's a global shortage, not only in India," he said, adding that power is the one thing you cannot import.

With the economy growing at 7 percent, he estimated power demand to increase at 8 to 10 percent. The one number Agrawal will be closely watching this Budget will be the gross-domestic product (GDP) growth forecast.

"I would look for the expected GDP numbers for the next year," he told Moneycontrol, adding that we should remember that this is an interim budget that "we will have to wait for two more months to see the full picture".

Agrawal believes in the power of leadership and said that the current political leadership offers stability and has ushered in a sustainable growth momentum.

Leadership matters

He said that leadership can redefine a lot of things.

Agrawal gave the example of HDFC to illustrate this. "HDFC Bank in 1995, when they started, they had nothing. Today they are 12 percent of the total banking system. So obviously something must have gone right, the leadership must have done the right things given that opportunity," he said.

Agrawal said that similarly Indian economy has an opportunity and the question is how the country's political leadership will harness this opportunity. He placed confidence in the current leadership to see this through.

He said, "I think the biggest excitement in India is that we have very stable leadership after 30 years of coalition government. Now this leadership has also matured in their two terms."

"So the first term was a bit challenging because a lot of changes were there. In the second term, particularly in the second half of the second term, they are getting their act together and the growth momentum is picking up. I think this momentum will be taken into the third term, and it will become far more vigorous as we go forward," he added.

Agrawal pointed out that there is a lot of certainty round the current dispensation returning to power, and the only uncertainty is around the kind of majority they will win.

"Now the issue is, in terms of number of seats, is the government going to come with an all-time high number. The chances of disruption are low. Like 0.1 percent. There is a chance because it is a democracy at the end of the day. If there is a disruption, we'll have some setback for some time, then we'll see what happens from there," he said and added that any disruption may cause only a pain of a year or two, not more.

While the markets have been hitting new highs and there are concerns around overheated valuations, Agrawal said that there will always be pockets of opportunity.

Also read: As Sensex, Nifty eye budget momentum, here’s how markets moved during Modi’s past budgets

"Most of the companies will come back to their long-term averages. So you are going to be disappointed by paying high P/E," he cautioned.

"There are companies which are trading at 10 to 15 P/E. So I think there are pockets in the market where it has not completely become South Bombay sort of prices!" he added.