Dr VK Vijayakumar, chief investment strategist at Geojit Financial Services, says that the budget had no negative surprises and it is growth-oriented.
He expects that capital goods, cement, and steel will be direct beneficiaries of capex-led growth. Moreover, Vijayakumar feels 8 to 8.5 percent GDP growth in FY23 can be achieved with this big capex push. Corporate earnings can also be expected to grow impressively.
Edited excerpts:
Why did equities rally after the budget?
Equities have been in a brief pre-budget rally supported by renewed strength in the mother market US. This positive sentiment continued on the budget day also. FII selling dropping to just Rs 22 crore also helped the bulls. Another positive for the market was that the budget had no negative surprises. However, FIIs may turn sellers again at higher levels since the they consider Indian market valuations too high.
Is higher capex good for growth and corporate earnings?
This is a growth-oriented budget. The hike of 35.4 percent in capex to Rs 7.5 trillion is a big push for investment-led growth. Eight to 8.5 percent GDP growth in FY23 can be achieved with this big capex push. Corporate earnings can be expected to grow impressively.
There was no tax reduction. Is that negative for consumer demand amid the pandemic?
The fiscal situation doesn't have room for tax concessions. The emphasis is on investment-led growth. Massive capex can crowd in private investment starting a virtuous cycle of growth.
What are the sectors which will benefit because of the budget announcement?
Capital goods, cement, and steel are direct beneficiaries of capex-led growth. When growth picks up, the present trend of rising credit growth will gather momentum, benefiting banks and NBFCs.
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