We are not confident about the government meeting the fiscal deficit target, the revenue receipts are clearly falling short of target. With that realization, anything below 3.5 percent would be a good number, Anil Sarin, CIO - PMS, Centrum, said in an interview to Moneycontrol's Sunil Shankar Matkar.
Edited excerpt:
Q: What are your expectations from the upcoming Budget? Do you think it will turn out to be big, considering the economic slowdown?
In our assessment, Indian economy needs structural reforms and supportive policies for correcting the currently weak situation in Indian economy. Budget is strictly not the forum for addressing most of these issues. However, budget speech can be used to indicate the policy direction.
With that caveat, we feel the following steps would lift the market sentiment - Budget should provide a ‘Bad Bank’ type of solution to the ongoing crisis in Real Estate sector. Second, it should contain provisions for ameliorating the pressure on NBFCs.
Third, a well thought out articulation of long term policy on disinvestment would be welcome. In the past, we have seen piecemeal announcements made in a hurried fashion, which have led to confusion and under-achievement of disinvestment targets.
That being said, the government is under pressure to balance the books, and there are multiple conflicting demands. As such we do not expect this to a ‘big’ budget, in the sense of one that immediately changes the direction of the economy.
Q: Do you think the government will be able to meet this fiscal deficit target? If not, what would be the comfortable level for market?
We are not confident about the government meeting the fiscal deficit target, the revenue receipts are clearly falling short of target. With that realization, anything below 3.5 percent would be a good number.
Q: Which are the sectors that are likely to hog the limelight in this Budget 2020 and why?
Infrastructure, Real Estate and NBFCs should be the focus as they have witnessed significant headwinds in the last 12-18 months. Their revival is key. Additionally, support for rural sector and allocation towards education would the other interesting things to watch for.
Q: Do you think infrastructure could turn out to be a strong beneficiary in the upcoming Budget?
Government has already made clear its strong intentions toward infrastructure. What we would be looking for is specific guidance on the sources of funds to finance this massive outlay.
Q: What are the expectations from Budget 2020 from investors or market perspective?
Positive announcement with regard to LTCG and Dividend Distribution Tax would be welcomed.
Q: Do you expect sharp correction in the market after the Budget 2020 and can the Nifty test 11,000 before moving towards 13,000 mark?
Yes, given the run up, a partial sell off cannot be ruled out.
Q: Will it be a bumper year for mid-smallcaps?
Flows into equity markets continue to be healthy despite the weak outlook on economy, and despite the relatively poor result announcements of consumption-oriented companies. Against that backdrop, valuation disparity between A and B group stocks (in favour of A Group stocks) has reached historic proportions, not seen in last 20 years. Meanwhile, EPS growth of NSE 100 Midcap companies has been consistently stronger than NIFTY 50 companies for the past three quarters ending in September 2019 (results for December quarter are still coming out). In summary, small/midcaps are showing stronger earnings growth, are available at cheap valuations and overall outlook towards equity investing remains positive. Therefore we believe calendar 2020 would be a good year for mid/small caps.
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