We are positive on overall consumption themes both urban and rural. There are specific consumption related sectors which are doing well and investors could focus there.
Missing the fiscal target or meeting just in name (number), not spirit is gradually being priced in, Dipan Mehta, Director, Elixir Equities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) What are your expectations from the upcoming Interim Budget? Arun Jaitley has already highlighted that it would be more than just Vote on Account.
A) There are virtually no expectations. The next RBI policy in February may have a greater impact on the financial markets.
Q) Most experts are of the view that govt. might not be able to meet its fiscal deficit target for this fiscal. Do you think we could see a knee-jerk reaction on that count?
A) No knee-jerk reaction. Missing the fiscal target or meeting just in name (number), not spirit is gradually being priced in.
Q) The FM in a speech highlighted that the government would address issues confronting the farm sector. Those changes would be good for consumption but not necessarily fiscal deficit. What kind of sops are you factoring in your estimates?
A) Depends on the sops, but we are positive on overall consumption themes both urban and rural. There are specific consumption related sectors which are doing well and investors could focus there.
Q) What are your views on the biggies which have come out with their results for Q3 such as RIL, HUL, Wipro as well as HDFC Bank?
A) A very good set of numbers have been reported from each of these titans. However, investors must not extrapolate these earnings over an extended period. The profit growth has been due to very company-specific trends which may end over the next few quarters, perhaps in FY20 itself.
Fact of the matter remains that these are large companies and over a period of time base effect comes into play. The risk reward equation, post the rally in these shares, is not conducive for investing. Most of these companies are at peak valuations given their long term growth potential.
Q) What according to you should be ideal portfolio allocation ahead of Budget?
A) Budget will not affect portfolio allocation. Interest rates, global economic trends, commodity prices and consumption trends are at the core of portfolio allocation.
The importance of the Budget has reduced significantly given that the power to fix GST rates rests with the GST council and there is limited room for the FM to make any changes in the income tax rates. Investors must avoid designing their strategies around this budget as well as future budgets.
Q) Any 5 stocks which are likely to benefit the most from the upcoming Budget and why?
A) No stock specific recommendations based on Budget. But our Diwali picks – Thomas Cook, Delta Corp and IDFC First Bank are still good for investing. We and our clients have a vested interest in these stocks.
Q) Historically, which are the sectors that have been in limelight ahead of the Budget and what are you recommending your clients and why?
A) Rural focused sectors attract trader interest pre-Budget, but there is rarely any follow through post budget. This time, we have not noticed any pre budget buying in any sector.
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