The largest beneficiaries of the Budget are consumption stocks, especially discretionary consumption stocks since disposable income would increase, Rajiv Ranjan Singh, CEO, Karvy Stock Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
Q) Your first reaction on the Interim Budget?
A) Firstly, despite this being an Interim Budget, it was certainly a non-routine Budget. It was a mildly expansionary budget and has done plenty to please voters without breaking the bank.
The income support provided to small farmers will help address stress in the rural areas and is a mild positive for rural consumption. Tax cuts, largely aimed at the middle class, besides pleasing voters, will increase consumption.
This is in addition to the continued focus on social sector schemes. The beneficiary of the Budget will be consumption-related stocks, as disposable income; both in rural areas, as well as urban areas will increase.
What we also liked is that these measures have been taken without a significant increase in the fiscal deficit. Fiscal slippage for the current year (FY18-19) has been minor i.e. 3.4 percent of GDP vs initial target of 3.3 percent of GDP.
For the next year, the estimate is at 3.4% of GDP for FY19-20, which is good, considering the committed increases. What we are disappointed with is the low increase in the government capex, however, we would expect that spending on infrastructure should pick up from FY20-21.
Q) Do you give a Thumbs up or Thumbs down? Also, your rating from 1-5 (5 being the best) for the Interim Budget.
A) We would rate it at 5 given the backdrop in which the Budget is being presented; the Budget is expansionary without breaking the bank.
Q) Top stocks which emerged as winners on the Budget Day, and why?
A) The largest beneficiaries of the Budget are consumption stocks, especially discretionary consumption stocks since disposable income would increase.
Two-wheeler names like Hero MotoCorp, Eicher Motors and tractor manufacturers like Mahindra & Mahindra and Escorts are the biggest beneficiaries. FMCG stocks like Hindustan Unilever are also gainers as rural consumption will benefit.
Q) Top stocks which emerged as losers or which are likely to get negatively impacted by Budget proposals and why
A) Low increase in government capex was the disappointment in the budget and from the budget alone capital goods stocks like Larsen & Toubro are relative losers; however, we believe that spending on infrastructure should pick up from FY20-21, and private capex is likely to pick up and we would be buyers in case of a significant decline.
Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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