In the midcap space, Edelweiss bets on L&T Infotech, Gujarat State Petronet, PI Industries, Dr. Lal Pathlabs, Teamlease Services, and Apollo Hospitals
The Interim Budget 2019 was reasonably balanced in its fiscal approach with the fiscal deficit target for FY19 and FY20 pegged at 3.4 percent of the GDP but for markets, Edelweiss Securities still maintains its cautious stance.
The Budget was tilted towards consumption and will be good for lower-end consumption, rural businesses particularly, agri-related, consumer staples, two-wheelers and real estate.
“However, it does not change our view on rates (cut ahead) or the market. We are cautious, with June 2019 Nifty target range of 9,800-10,500 and a defensive bias in the sector and stock selection,” the brokerage house said in a report.
Edelweiss views the Budget math and assumptions at 3.4 percent of GDP fiscal deficit as reasonable. The government has balanced the rise in deficit target through lower investment spending growth (12 percent) and will shift the onus of capex to the private sector which will be a near-term challenge, Edelweiss added.
The income support programme with its permanence and likelihood of expansion will also make growth more of a long-term imperative, else it will risk the current cushion on inflation, rates and liquidity.
History suggests that budgets are seldom decisive for markets in the near term and so shall it be this time. Investors will be better off investing money in sectors that are likely to benefit from distinct mass/rural consumption.
The measures announced in the Budget will boost rural businesses. Other sectors like consumer staples, discretionary to a lesser extent (two-wheelers, durables), microfinance and real estate (specific breaks) will benefit the most, said the Edelweiss report.
These businesses should have some tailwind. That said, given uncertainties such as elections, global economy, credit squeeze, still slow and inconsistent business/earnings cycle and reasonably high valuations, we stay cautious on the market and maintain a defensive portfolio, it added.
Edelweiss handpicks stocks from large and midcaps space for investors. In the large-cap space, Edelweiss Securities' top picks are Reliance Industries, Infosys, ICICI Bank, L&T, Nestle India, Dabur, Dr. Reddy’s Laboratories and Divi’s Laboratories.
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