Budget 2024 expectations: Focus may be on reviving rural economy; more sectors may come under PLI: Rahul Jain of Nuvama

Rahul Jain, President and Head of Nuvama Wealth believes that reviving the rural economy, which has slowed down due to deficient monsoon, will be the government's focus in the Interim Budget 2024. He also expects more sectors to fall in the ambit of PLI. In an interview with Mint, Jain also shared his views on markets and the sectors he is positive about. Edited excerpts:

What are your expectations from Budget 2024 from the market's perspective?

We believe the government will focus on reviving the rural economy, which has slowed down due to deficient monsoon. We expect a higher allocation to schemes like MNREGA to increase the per-day income of rural areas. This will likely augur well for two-wheelers and similar bottom-of-pyramid consumptions. We expect little incentive for the industry.

Also Read: Budget 2024: Focus on rural schemes, infra investment likely, says veteran fund manager Mihir Vora

We have General Elections this year. Do you expect the Budget to have hues of populism, or will the government focus more on fiscal prudence and announce major to boost manufacturing and infrastructure?

Our expectations from the Interim Budget as mentioned earlier will be to give impetus to the rural economy to revive growth, resulting in higher allocation to MNREGA. Further, from a fiscal consolidation point of view, we expect the outlay on infrastructure to be lower compared to the previous years. As for the manufacturing sector, we expect more sectors to fall in the ambit of PLI.

Also Read: Budget 2024 expectations: Nirmal Bang highlights 6 major themes that could dominate the Interim Budget 2024

The global growth outlook remains hazy. How could it impact our stock market? To what extent can our market remain immune to global headwinds and rely on the robust growth outlook of the domestic economy?

We have a different take on the global economy. For instance, Japan is doing exceptionally well, US consumer spending is strong, and Europe has a low base as far as economic data is concerned. Hence, ideally, it should improve from here on. The only problem area is China, where growth is elusive. However, a weak Chinese economy is good for countries like India and the USA, which will have lower inflation, leading to lower yields.

Do you think most positives are already discounted? What are the main challenges for the domestic market this year?

To some extent, the positives are discounted. As far as markets are concerned, valuations matter the most. We are already trading at a PE of 21 times one-year forward earnings, which could be a challenge. We believe 2024 will be a stock picker’s market. Hence, the broader market may not have the same return as in 2023.

Also Read: Market strategy in 2024: Kotak Institutional lists 3 key challenges investors will face this year

There is a sharp jump in the number of domestic investors. Can their reaction to market volatility be a significant risk for the market?

Post-COVID (which led to the emergence of the retail investor base), 2022 was a bad year with a lot of volatility. We believe the retail investors have matured over time, which is reflected in the month-on-month increase in mutual fund SIP collections. Should there be higher volatility, we don’t expect their investment pattern to change and pose a significant risk for the markets.

What sectors are you positive about? What makes you positive about them?

We believe rural themes like two-wheelers and consumer durables look interesting for 2024. Sectors like technology are expected to get a fillip from the lower bond yield in the USA. Opportunities may arise even in the chemical sector, which has underperformed for two to three years.

Do you believe the domestic market can replicate last year's performance this year as well?

In our view, 2023 was an exceptional year, starting with a reasonable valuation of 16 times. Currently, we are trading at 21 times 12-month forward PE. Therefore, we believe 2024 will be the year of stock picking rather than a broader market rally.

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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.