Budget 2024 may be balanced; NDA’s win in 2024 may not trigger any sharp rally, says Ashutosh Tiwari of Equirus
Ashutosh Tiwari, Managing Director and Head of Institutional Equities at Equirus believes Budget 2024 may be balanced. It may be growth-oriented and also include populist measures with a focus on rural and lower strata of society.
Ashutosh Tiwari, Managing Director and Head of Institutional Equities at Equirus believes Budget 2024 may be balanced, along with growth orientation, and it will also include populist measures with a focus on rural and lower strata of society which has been under distress post Covid. In an interview with Mint, he says NDA's win in the 2024 General Election will not trigger any sharp rally in the market. However, a loss can cause an immediate negative reaction in the markets. Edited excerpts:
We have major events like Budget and General Elections 2024. Do you expect the Budget to remain growth-oriented ahead of elections?
With the central election in 2024 around, the Budget is likely to be balanced next year, along with growth orientation, we believe it will also include populist measures with a focus on rural and lower strata of society which has been under distress post-Covid.
Women welfare schemes like Ladli Behna in MP are considered to be one of the major reasons behind big wins of the BJP in recent state elections and therefore it is quite likely that the government might announce more women welfare-related central schemes in the 2024 Budget.
During May-Jun as well as the recent festive season, we have seen some signs of recovery in rural which is evident from improvement in two-wheeler (2Ws) retails which grew nearly 20 per cent year-on-year (YoY) during the festive period.
Moderating inflation also augurs well for rural recovery as it leaves more in hand for consumers to spend on discretionary items. Still, rural benefit schemes will be on top of the government’s agenda during the budget.
The government has been very clear in its growth strategies whether it is in the form of better road connectivity, improvement in rail infrastructure, localisation of imports/development of value chain for electronics or EVs etc., and we believe that it should continue in next year's budget as well.
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How big is next year's general election a trigger for the market? Can NDA's loss cause a steep correction?
With recent big wins in MP, Chhattisgarh and Rajasthan state elections, the likelihood of NDA coming to power again in 2024 has increased substantially.
In the past, even in states where NDA did poorly in state elections, they were able to garner better vote share in the central election and therefore 2024 win is the general belief among investors.
We don’t think the 2024 win will trigger any sharp rally in the market, it will just be business as usual.
A loss though can cause an immediate negative reaction in the markets.
However, economic growth and in turn earnings growth of the companies aren’t impacted by government changes in the short term.
Foundations laid by the current government in infrastructure, manufacturing, import substitution etc are going to fuel economic growth over the medium term and hence barring short-term reactions, we don’t see any risk of a steep correction in the markets.
The Indian economy remains one of the brightest major economies globally. What are the major challenges you see ahead?
While domestic growth drivers are strong in India, the external scenario is still quite fragile which does impact exports from the country and may remain challenging.
Also, with a large dependence on imported crude oil, any adverse movement in the same due to geopolitical tensions can pose a challenge to growth and inflation.
The rural economy is showing initial signs of recovery despite the patchy monsoon during 2023 which wasn’t well distributed, however, the rural economy will not be able to absorb another bad monsoon and hence 2024 monsoon is critical.
What is your assessment of the current market structure? Are we going to end the year with a double-digit return?
Fall in global bond yields, correction in the dollar index and crude prices which fell below $80 augur well for equity markets especially India which is a large crude importer.
India is in a structurally better position compared to most of the emerging economies driven by a better domestic demand scenario and export opportunities emanating from the China +1 approach in sourcing by many global companies.
Q2 GDP growth also came better than expectations at 7.6 per cent largely led by strong growth in the manufacturing sector.
With cyclical recovery in real estate, power and other old economy sectors, manufacturing is likely to be the main theme going ahead which also helps in job creation at lower strata of society.
Markets have already delivered double-digit returns year-to-date (YTD) calendar year 2023 (CY23) and we don’t see any challenge in sustaining the same as foreign investors have tried many times to go overweight on China over the last 12-18 months but failed to generate returns while India is consistent outperformer.
Domestic flows to mutual funds also remain very strong as equity as an investment class has taken priority among the new generation versus gold and real estate for earlier generations.
PSU and defence stocks have hogged the limelight this year. Is there more steam left in them?
The majority of PSU companies are more involved in asset-heavy manufacturing businesses whether directly or indirectly. For example, PSU banks lend to asset-heavy businesses.
We are seeing a strong recovery in the manufacturing sector in India driven by power, infrastructure, real estate, railways, etc.
PSUs are likely to remain in flavour over the next few years.
PSU bank asset quality has improved materially over the last few years due to the NPA clean-up and as they are still the largest lender for asset-heavy industries like power generation, distribution, infrastructure, etc., we believe that we PSU banks can see rerating over the next three to five years.
In the case of defence stocks, while growth prospects are extremely strong and driven by localisation initiatives of the government, many companies are trading at unreasonable valuations and hence investors need to be selective in the segment.
Disclaimer: The views and recommendations above are those of the expert, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Business NewsBudgetBudget ExpectationsBudget 2024 may be balanced; NDA’s win in 2024 may not trigger any sharp rally, says Ashutosh Tiwari of Equirus
First Published:8 Dec 2023, 07:39 AM IST
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