The Budget shouldn't matter much to long-term investors, but a trader may have to worry about policies, is the word coming in from Lalit Nambiar of UTI Mutual Fund. Going by the government commentary, labour-generating sectors might gain, he says.
However, he says rather than playing the Budget nuances, investors might be better off playing the sectors that stand to gain from economic revival.
He expects the government to tone down its aggression when it comes to taxation. “Overall ease of doing business will be the focus of this government, which will be outside the Budget,” he told CNBC-TV18.
Echoing the views of Raghuram Rajan, Nambiar too believes that the quality of fiscal consolidation, capital expenditure is more important than quantity. Productive capital spend will be seen as a positive, he adds.
Below is the verbatim transcript of Lalit Nambiar's interview with Sonia Shenoy and Ekta Batra on CNBC-TV18.
Sonia: What is the recommendation to investors at this point in time? The market has faced a bit of hurdle at higher levels perhaps bracing itself for the Budget but is this still an opportune time for investors to put money into equities?
A: If you are a long-term investor the Budget shouldn’t matter so much. You know broadly the direction in which the government wants to go so I don’t think that should be an issue in the minds of a long-term investor. On the other hand if you are a trader possibly you may have to worry about policies. However, if you look at the government’s intent, it is very clear that it wants to increase employment through its policies and the Budget is one such instrument to do that.
It wants to focus on areas like footwear, electronic assembly which are labour generating, roads for instance; that is one aspect which you could look at from a sectoral point of view if one wanted to. However, rather than play these Budget nuances probably you want to focus on companies which are going to be in the early part of the economic recovery cycle. So, you will have banks, cement leading the cycle and maybe mid-cycle companies like capital goods could also be looked at and that is probably the way you want to play it for the next two to three years rather than look at what is going to happen in the next month or so.
Ekta: Wanted to focus a little more on the Budget. One of the key themes that is expected to play out is say ‘Make in India’ so a lot of emphasis on the manufacturing space. In that light would you possibly accumulate companies from a one to two year space just focusing on manufacturing?
A: I think manufacturing is a very broad term. From the Budget I would be looking at sector specific measures. You would have some benefits at least in terms of ease of doing business which has been emphasised even by the economic advisor and by Arvind Panagariya who is advising the prime minister. So, that is one aspect which the government will look at in the Budget.
There will also be possibly a tone down in the aggression with respect to taxation. I think these will be the signs which the manufacturing sector will look for as far as ‘Make in India’ is concerned.
A lot of ‘Make in India’ will happen outside the Budget because it implies inviting international investors into India in terms of foreign direct investment (FDI) rather than specific tax based incentives. Tax would be part of it but the overall ease of doing business which will be a bigger focus and that stands outside the Budget.
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