Moneycontrol Editor, Santosh Nair gets in conversation with CNBC-TV18 Consulting Editor, Udayan Mukherjee to discuss the Budget and its impact on the stock market and the economy.
"I have no hesitation in calling this a stimulus package because that is what it is," says CNBC-TV18 Consulting Editor Udayan Mukherjee about Budget 2019, presented by interim Finance Minister Piyush Goyal.
In a conversation with Moneycontrol Editor Santosh Nair, Mukherjee said the Budget does not change the outlook for the market, though it does change the outlook for some consumption stocks at the lower end of the consumption prism.
Mukherjee says for the rest of the market, the Budget is largely neutral because of the modest amount of stimulus and the modest amount of slippage in the fiscal deficit target.
"The Budget will be forgotten by the market in 2-3 days," Mukherjee says, adding, "..Budgets generally are not trend changers and this one will be no different."
For specific parts of the market like real estate or consumption, one could see the euphoria last for a few more days, he says.
On fiscal deficit for this year missing the target by 0.1 percent, he says: "The issue with the fiscal slippage is not that we have overstepped the mark by 0.1 percent this year. In addition to fact that this fiscal deficit number is something that we arrive at by some innovative mathematic, every year we are now finding some excuse or reason to spill over. Last year it was because of GST, and this year it is because of the farm package."
Mukherjee says the bond market will suspect that we will find some excuse or the other to stray from the roadmap of bringing fiscal deficit below 3 percent of GDP.
"We stalled it last year, we stalled it this year, and using aggressive assumptions, we are still at 3.4 percent for next year. This will be worrying the bond markets and international investors," he says.
Mukherjee does not expect the RBI to lower interest rates when it meets on February 7 to review the monetary policy.
"The RBI would have overlooked the 3.4 percent number for 2019 because the GST numbers have fallen short. But the fact that the government has done a farm package and kept next year's number at 3.4 percent, would be a restrictive factor for the RBI to lower interest rates," he says.
On portfolio positioning, Mukherjee says that since the amount that the farmers will be getting from the sops announced in the Budget is not very high, investors looking to play the rural consumption theme should look at small ticket consumption items like staples, leather, paints, he says.
Dabur, Emami, HUL, Relaxo, Kansai, Asian Paints, and Berger would be the stocks to look at, he says. To play the urban consumption theme, two-wheelers would be the best bet, he says.The stock market has still not started to price in the likelihood of the BJP struggling to get a majority in the upcoming elections, he says.
He expects the market to be volatile in the run up to the Budget and that one should have a defensive portfolio.
He says the earnings season has been by and large a mixed one, and there have not been too many earnings upgrades. He says the market is more worried about promoter related problems, referring to the sell-off in DHFL, Zee and now Vedanta.
"That is something that will affect midcap sentiment and I would keep a close eye on that," he says.For more, watch the video.