Santosh Joseph, founder and CEO, Refolio Investments and Germinate Investor Services LLP, is not expecting big-ticket announcements when the Union Budget is presented on February 1 but there are sectors he will keep an eye out for.
Renewable energy, domestic tourism and travel industry are his picks not just for the interim budget but for the long run as well.
The financial services professional with over 20 years of experience says the ongoing earnings season has largely been in line with expectations and commentaries are looking good.
In an interview to Moneycontrol, Joseph also talks about how consumer discretionary and auto make an interesting play, why power sector expectations need to be tamped down even as he refuses to guess the US Federal Reserve’s next move. Edited excerpts:
Do you expect any major announcements in the interim budget with general elections a few months away?
One is not expecting any major reforms or key changes in this interim budget. Historically, whenever we have gone for an interim budget, it is largely a low-key event, yet it is done in the schedule and practice of presenting a union budget. Therefore, though we do have a lot of anticipation, it is going to be a low-key affair.
One would not go into reading much into it or having high expectations because even the government would want to play it safe. This budget is going to be just a regular activity where one will not expect too many big- bang announcements or action.
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Which are the sectors to watch out for in the budget?
The sectors to watch for, which will actually have a bearing in the long run, are renewable energy, domestic tourism and travel industry. Over the last two-three years, we have seen increasing importance of manufacturing, defence services and even infrastructure.
We are in a situation where some of the sectors that are in the news now like defence, manufacturing and railways will continue to be the focus areas. However, we will see a lot more activity right now going forward into renewables, solar and incentives for sustainable practices.
Also read: Budget 2024: Do budgets impact market trends?
Is it time to be cautious on staples sector?
On the staple side one cannot say you’ve to be cautious right now. The market is well poised as far as the staple sector is concerned. While everybody expects the economy to do better quarter by quarter, year after year, rather than being cautious, more or less, people are going to be measured about the outcome and the exposure of the sector.
Most experts are bullish on the power and power ancillary space, which has recorded healthy gains so far. Is it looking overbought?
Clearly power ancillaries, power distribution and power equipment have all done phenomenally well in the last year or so. If one looks at it from the perspective of a slightly long-term view, they have done good in the last one year. When you look at a long term trend of India’s need for power and the need for the entire distribution and the equipment ecospace, we still have a long runway to go.
It is also a point to note that so much of the gains have come frontloaded, though this is not the end of the story or that from here it is going to be downhill, there is still more room but it won't be as aggressive or as swift as what we’ve seen in the past year or so. But structurally the sector is looking very good and it has many many more good years but one has to taper down the expectation and look for a more normal or a healthy growth.
Also read: Ahead of Budget, IMF raises India's FY25, FY26 GDP growth forecasts to 6.5%
Do you expect the Federal Reserve to give a firm direction on the interest rate cut cycle in the policy meeting that starts today?
One is looking at the Fed’s action very seriously. The meetings and the schedules that have started right now at some point should give us an indication of how 2024 is going to be. While the market is hoping that the Fed’s actions will eventually be more positive towards the markets, one really cannot say till the announcements are made.
The most prudent way to anticipate the Fed’s reaction is to wait till the announcements are made. Given the very different kinds of circumstances that we are presently in, it’s better to wait rather than speculate.
What is your take on the consumer discretionary and the auto space?
Both consumer discretionary and auto space at some level fall into the core/fundamental aspect of the economy doing well. I believe that irrespective of how they have been in the last few quarters, they make a very interesting play and within them, there are a few companies that are outliers in that space.
It’s something that you have to dig deep and pay attention to right amount of research and good quality stock picking or even fund selection to make the most out of that space.
Are the current earnings and management commentaries in line with your expectations?
At a macro level, the earnings outcomes and the management commentaries are more or less looking good. Most of them are in line with the consensus of the market. Some of them have done better. The interesting part is that most of them are anticipating better days ahead.
By and large, the earnings are in line with the expectations and the management commentaries are looking favourable. In some cases, they are very bullish. Overall, the takeaway is that the earning numbers and the commentaries are that we are in a reasonably good situation looking forward.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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