Nishit Master, Portfolio Manager at Axis Securities PMS, doesn’t expect the interim budget, which will be presented on February 1 to be market-moving event.
The full budget that will be tabled after the Lok Sabha elections will be significant in laying down the new government’s reforms intent and will be tracked closely, said Master, who has more than 18 years of experience in the financial services industry.
He expects private banks, which has been hammered in last few weeks, to face increased pressure on either growth or margins or both ends. They will need to raise deposits aggressively or slow down credit growth to reign in a high credit/deposit ratio, he tells Moneycontrol in an interview. Edited excerpts:
Do you think the interim budget is an important factor for the market?
We don't believe the finance minister will announce significant reforms or new policy initiatives in the interim budget. The government will wait for a fresh mandate and let the new government roll out new reforms in the budget after the national elections. Thus, the interim budget will not be a significant factor for the markets.
Do you expect more populist measures when the interim budget is presented on February 1?
This government has stayed away from significant populist measures and we believe that next week's interim budget will not have any significant incremental expenditure on new populist measures.
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Are you happy with the corporate earnings announced, so far?
This quarterly result season has been a mixed bag, so far. Even though banks' earnings in most cases have met with market expectations, the internals have been weak. There are initial signs of some stress building up in the non-secured retail credit apart from growth and margin pressure in the future due to the high credit/deposit ratio.
IT companies have met their already low expectations but there are also no major positive surprises.
Are you worried about private banks after the December earnings? Have you changed your outlook ?
We believe private banks will face increasing pressure on either growth or margins or both going ahead since they will have to raise deposits aggressively or slow down credit growth to reign in a high credit/deposit ratio. We have lowered our holding in private banks during this earnings season.
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Most experts see muted returns for the market in 2024. Do you feel so and why?
In spite of the fact that we had a fairly strong run-up in 2023, which has kept market valuations elevated, we believe that the Indian equity markets can give low to mid-teen growth in 2024 on the back of stable earnings growth. We believe that after the recent run-up, markets might remain volatile in the short term.
However, from a mid-to-long-term perspective, FPIs and DIIs will continue to put money in the Indian markets as no other large economy provides them with a stable and strong growth profile.
Do you think the small and mid caps will continue to do better than large caps even in the current calendar year?
We believe the extent of outperformance that small and mid-caps exhibited in 2023 compared to large caps may not be repeated in 2024. Quite a few mid and small caps today are trading at frothy valuations, which can lead to their underperformance in the near term.
Do you see any major risk factors (domestic and global) in the first half of the current calendar year?
The following scenarios are some of the significant risk factors for the markets in the first half of the current calendar year:
1) If the markets begin to question the continuity of policies in India
2) Any geopolitical event globally that impacts energy prices or logistics costs and goods movement
3) If we have a credit or liquidity event with major global banks.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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