Capex not accelerating but moderating in Budget; govt has to do the heavy lifting: Bernstein's Venugopal Garre

The banking system will be generally a bit careful about lending to private sector, esspecially if it is linked to infra. So the heavy lifting has to be done by the government.

The most important takeaway in this year's Budget, according to Venugopal Garre, Managing Director at Bernstein, is that capex is actually not accelerating but moderating.

"There is the accounting aspect in the Budget that one needs to be careful of and if you look at the infra part, which accounts to 75-80 percent of the Rs 10 lakh crore number that we see, it is actually going to be up only 20 percent YoY compared to 31 percent growth in the previous year. The reality is that this is happening primarily on the account of the fact that you have these extra Budgetary resources," Garre told CNBC-TV18 in an interview.

"Private sector capex was not expected to be great this year. The banking sector will be generally a bit careful about lending to the private sector, especially if it is linked to infra. So the heavy lifting has to be done by the government," he said.

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"We are neutral to negative from infra point of view," he added.

The volatility in the market caught everyone by surprise and this year a lot of volatility will be seen being a pre-election year, added Garre.

The expert also does not see a major change post the companies' earnings numbers and he feels that it is not giving any directional trend.

To an large extent, the earnings season was neutral wherein certain sectors exhibited positivity and certain sectors reported weak numbers, he added.

"The reality is since financials is the largest sector out here and that is where we have seen positive numbers coming through, it probably gives us feeling that things are in the right place, especially how the economy is shaping up but when you contrast it with consumption related, you actually see general weak numbers, especially those related to urban consumption," Garre said.

Between financials and consumption sectors, one can see two different trends at this juncture. "All the other sectors are all over the place with no unique trend."

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