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Last Updated : Jun 26, 2019 12:12 PM IST | Source: Moneycontrol.com

See many pockets of opportunity in virtually every sector: Dipan Mehta

However, June quarter numbers will be disappointing as nothing much has changed over the past three months from the March quarter, Dipan Mehta of Elixir Equities

we hope that no new draconian tax like Estate duty or Wealth Tax on Equities is imposed. We and the market at large have very little hope and expectation from the first budget of Modi 2.0 government, Dipan Mehta, Director, at Elixir Equities Pvt. Ltd, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

Q: What are your expectations from the Budget?

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A: We have absolutely no expectation from this Budget, only hope and prayer that no new taxes are levied on corporates or investors or that none of the existing plethora of taxes viz. STT, Capital Gains Tax, Dividend Distribution Tax and Stamp Duty get raised further.

Also, we hope that no new draconian tax like Estate duty or Wealth Tax on Equities is imposed. We and the market at large have very little hope and expectation from the first budget of Modi 2.0 government.

Q: Will the government retain fiscal deficit target at 3.4 percent of GDP for FY20?

A: Well, that is for the government to answer. Last fiscal’s target has been met by postponing payments and passing on borrowing to state-owned enterprises such as FCI.

We hope that such adjustments are not resorted to for this year as well. The revival of the economy and the stock markets is dependent on lower interest rates.

If the government and quasi-government borrowings are not curtailed, interest rates may not come down and that will affect sentiment.

Q: Will there be financial sector reforms such as privatisation of some PSU banks, capital infusion, etc. in the upcoming Budget?

A: Highly unlikely, the mantra of the Modi 1.0 government was ‘Minimum Government, Maximum Governance’. That should have meant lower government interference and exit from industries the government has no need to be present in.

It also meant greater autonomy to PSUs. However, since the Modi government has not walked the talk in the first five years, what has changed for them to review their approach?

There will be no change in government policies. There is no urgency and the massive mandate means that the government will assume that all their policies are working and accepted by the populace at large. Don’t expect any course change or introspection on the part of the government.

Q: Will the government give investment stimulus to boost growth in Budget 2019?

A: Apart from fiscal concessions, for which there is no fiscal room, there is very little that the government can do to revive investments.

Increased capex is driven by lower interest rates and rising consumption, which cannot be dictated by the ministries and are more or less market driven.

Infra spending is the need of the hour but financial markets have punished almost every private company which has undertaken an infra project.

Also, there is no appetite to lend or provide equity for infra projects due to poor economics and uncertain cash flows.

Given this setup, there is very little the government can do to revive growth apart from getting its house in order by reducing wasteful government expenditure and lowering compliances so that SMEs can focus on growth.

Q: Amid the recent fall we have seen in markets, where are the pockets of opportunities? Where is the smart money moving?

A: There are many pockets of opportunity in virtually every sector, even external focused ones such as IT and pharma. However, investor expectations have to be tempered and the time horizon has to be extended.

There are consumption oriented sectors such as autos, appliances, building material and FMCG for which a broad revival has to take place for their turnaround.

That will eventually happen but there is no way to predict the timing and all earlier forecasts of revival have been inaccurate.

Financials have been plagued by liquidity issues and fears of a contagion effect and the stronger players within the sector will flourish once this phase will end.

Once again, it is difficult to predict when that will happen. IT is pinned down by fears of a global economic slowdown due to trade wars; when those concerns will dissipate is anyone’s guess. So this is the position of most sectors.

Long term growth dynamics are intact and opportunity is huge, but, serious transient headwinds will have to be navigated before investors are rewarded.

Q: Any top stocks that investors can buy ahead of the Budget? 

A: With monsoons, budget and earnings season uncertainties, we would prefer investors to wait and watch rather than invest.

Q: What are your expectations from the June quarter numbers from India Inc.?

A: June quarter numbers will be disappointing as nothing much has changed over the past three months from the March quarter.

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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First Published on Jun 26, 2019 12:03 pm
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