Consumption wins over capex in Budget 2025; investors looking to diversity beyond equities: Lakshmi Iyer, Kotak AMC

Lakshmi Iyer, CEO - Investment & Strategy, Kotak Alternate Asset Managers

Between the two Cs, capex and consumption, clearly the common man 0r the consumption boost has been the winner in the Budget, said Lakshmi Iyer, CEO - Investment & Strategy, at Kotak Alternate Asset Managers in conversation with Moneycontrol.

"It is quite likely that markets may think that the capex growth is not as much, but one can't completely undermine the positive impact of the consumption boost that happened on account of the tax rationalisation," Iyer added.

Finance Minister Nirmala Sitharaman announced that income up to Rs 12 lakh will be tax-free. This move in the Union Budget 2025 is expected to boost consumption by increasing household income, thereby driving demand for consumer staple products.

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Discussing expectations of market returns, Lakshmi Iyer believes that there are muted expectations. "The mood is getting a little bit cautious on equities, especially the midcap segment and more avenues are being sought."

According to Iyer, investors are looking towards the unlisted space or gold or high in order to sail through the volatility. This comes as the yields are very low in the fixed income side as well, not even high enough to attract foreign investor interest, let alone domestic interest right now, she said.

On the rupee front, Iyer said that there would be further time needed to see sustained stability, as it is part of the emerging markets (EM) currency pack that is going through a soft patch currently.

As FIIs continue to sell, the Budget might not bring them back a they plan to diversify their allocations towards developed markets. "Maybe the pace can come down, but as long as the currency doesn't stabilise, it is very difficult to expect FPIs allocate more durably in the very near term."

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