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

Mihir Vora, veteran fund manager and the Chief Investment Officer (CIO) of TRUST Mutual Fund believes the Interim Budget 2024 will unlikely have big-bang announcements but the government may announce the continuation of the current initiatives and schemes. He expects capital expenditure for infrastructure like roads, railways, water, power and defence to increase and there may be some tweaking of the slabs for income tax to boost consumption. In an interview with Mint, Vora also shared his views on the markets and sectors to watch. Edited excerpts:

Do you expect the Interim Budget 2024 to have some announcements which can give a further boost to the market sentiment? What sectors could be in focus in this Budget?

The Vote on Account or Interim Budget is unlikely to have big-bang announcements or new initiatives since there are norms for such Budgets before elections. 

However, we may see the continuation of the current initiatives and schemes. 

Schemes for the rural poor and farmers, food subsidies may see higher allocation as the recovery of the rural economy is still tentative.

Also Read: Some popular schemes could be expanded in Budget 2024; CY24 will be a volatile year for the market: Kedar Kadam

Capital expenditure for infrastructure like roads, railways, water, power and defence will continue to increase – these are the sectors to watch. 

There may be some tweaking of the slabs for income tax – as a relief to the middle class and to boost consumption. 

The government is likely to stick to the path of fiscal consolidation with a target of 4.5 per cent in the next couple of years.

Also Read: Budget may cite ‘Vision 2047’ to seek long-term allocations

How do you expect the market to behave in the run-up to General Elections 2024? Would you recommend increasing exposure to equities at the current juncture?

The elections are already being discounted by the markets which are expecting continuity of regime. 

The recent pace of the rise in the markets, taking it to new highs is steep and calls for some caution. 

Retail investor frenzy is visible in the type of stocks that are moving fast. 

I would recommend continuation of the regular investments like SIPs, insurance premiums etc., but not to go for bulk purchases or trying to chase momentum.

Also Read: Nifty 50 usually gains 6 months pre and post general elections despite volatility: Motilal Oswal

December quarter earnings of some of the IT majors have exceeded expectations but concerns linger. Is the optimism around the IT sector exaggerated?

I am still a bit sceptical about the ‘recovery’ theme in IT. The US and European economies are continuing to slow down and most hard economic numbers are pointing towards the same. 

The recent results had no negatives and the sector was over-sold for some time so we are seeing some short-covering. 

I would like to see a sustained uptick in the order bookings to take a positive stance on the large-cap names. 

Having said that, there are opportunities in some of the mid-cap IT companies which are benefitting due to specific sectors or skillsets that they possess. 

These can continue to grow faster than the industry and hence there is scope for stockpicking within the sector.

Also Read: 9 out of 10 Nifty IT stocks hit 52-week high; is the investor exuberance on IT overdone? Here's what experts say

What themes are you betting on for the next two to three years?

India is expected to be the fastest-growing large economy in the world for the next few years and flows to the stock market are expected to continue. 

GDP will grow at 6-7 per cent with consumption and investments both contributing. 

Government initiatives on reforms, domestic procurement and local manufacturing/ import substitution are changing the mindset of the Indian business community. 

These will only accelerate in 2024 as people have seen initial successes of the production-linked schemes and initiatives in defence, railways, power, renewables, infrastructure, etc.

India is in a Goldilocks situation as global growth slowing down but not crashing and inflation is cooling off. This paves the way for lower interest rates and a sanguine environment for risk-taking.

The themes we believe in for the next few years are manufacturing, renewables, digitisation, infrastructure, urbanization, premium consumption, financialization of savings and the rise of equity savings cult.

The US Fed and the RBI are likely to cut rates in 2024. But will they cut rates significantly or will it be a shallow reduction? How could this impact the market?

The first cuts will be small – 25 basis points. Larger cuts may be warranted if there is a massive slowdown or a recession. 

Indian markets are looking at a Goldilocks environment where there are rate cuts in the Western world but no sharp recession. 

This is the current situation and hence conducive to risk-taking.

How should one invest to reap the benefits of India's economic growth?

India is the best-performing market in the world over the long term. 

The inherent structural strengths of demographics and openness combined with recent initiatives and the world’s focus on India as a manufacturing base, digital strengths and availability of risk capital are a potent combination for growth. 

We are expected to be the fastest-growing large economy in the world for quite some time. 

The best way to benefit from this growth story is to stay invested for the long term and enjoy the compounding of returns. 

Diversified or flexi-cap funds offer a good option. 

Thematic funds could be looked at if one has a higher risk appetite, but these involve some element of timing which is usually not easy.

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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.