Kedar Kadam, Director - Listed Investments at Waterfield Advisors is of the view that new large schemes may or may not be announced in this Interim Budget, but some existing popular schemes could see expansion/extra resources to boost implementation rates. In an interview with Mint, Kadam also shared his views on the domestic market and economy. Edited excerpts:
Well, going by the convention, the Interim Budget is presented to seek approval to cover expenditures for the next two to three months or till a new government is elected and presents the full Budget.
This year the Finance Minister herself has downplayed expectations, stating the February budget will carry no major announcements and the focus will be to keep the wheels running until the elections.
However, investors will closely watch the budget estimate numbers as these would highlight the overall fiscal health, the estimated transfers to the state governments, and the path of fiscal consolidation and central government debt relative to GDP.
In real terms, no law prescribes any clear guidelines for the Budget that comes right before the General Elections; hence, it can take any shape.
Having said this, if we look at the past Interim Budgets of 2004, 2014 and 2019, they all included noteworthy policy announcements like the extension of the subsidised food scheme, Kissan Credit Cards, One Rank-One Pension, a reprieve for the auto sector, and Kissan Samman, etc.
The recent state election results have shown that income transfer policies and other welfare schemes have been key to campaigns.
In this Interim Budget, while new large schemes may or may not be announced, some existing popular schemes could see expansion/extra resources to boost implementation rates these may include housing for all, health insurance, etc., and farmers' cash transfer schemes may see an increase.
Overall, in our view, social spending of the government (excluding subsidies) is to rise. The outlook for the Indian economy is bright.
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Given the current robust macro momentum (NSO’s GDP estimate of 7.3 per cent for FY’24) and sustained resilience to global developments, we do not see any major challenges to India’s growth story.
There will be some implications in terms of a slowdown in exports and FDI inflows, commodity prices. However, the resurgence in the domestic capex cycle coupled with momentum seen in sectors having multiplier effects like manufacturing, real estate (especially housing), infra and engineering and travel and hospitality should be able to mitigate pressures from the weak global economy.
According to the latest estimates from the World Bank, India’s GDP growth for FY25 and FY26 is projected to grow by 6.4 per cent and 6.5 per cent, making it a clear bright spot in an otherwise gloomy global growth scenario.
The World Bank has projected global growth to fall to 2.4 per cent in 2024 compared to 2.6 per cent in 2023, 3 per cent in 2022 and 6.2 per cent in 2021 when there was a rebound as the pandemic ended.
The US Federal Reserve in its Dec-23 policy meeting projected interest rate cuts of 75bps over the calendar year 2024 (CY24).
The Fed chair expressed comfort with inflation and as such returning to more normalised interest rates.
I will prefer not to predict the Fed’s move, however, the current market rally indicates that consensus is expecting more than a 75bps rate cut.
I expect CY24 will be a volatile year for the domestic as well as global markets. Amid uncertainties surrounding global economic growth, geopolitical uncertainties and relatively rich corporate valuations, this year will warrant cautious investing.
The recent victories for the ruling BJP party in state elections held in November 2023 have raised belief among investors that PM Narendra Modi will be re-elected for a third term in 2024 and the market is already pricing in a strong win for BJP.
Any unexpected election outcome will be a shocker for markets.
Also Read: Nifty 50 usually gains 6 months pre and post general elections despite volatility: Motilal Oswal
I think capital goods as a sector should continue to do well driven by the resurgence of a multi-year capex upcycle.
The gross fixed capital formation (GFCF) as a proportion of GDP touched a multi-year high of 35.3 per cent in the first half of the current financial year (1HFY24), led by government capex which rose 25 per cent YoY.
According to the latest RBI data, the capacity utilisation has reached a threshold of 74 per cent.
Many companies in manufacturing are using reserves and surplus for investment.
Given this backdrop and the existing healthy order book, the setup looks quite optimistic for the companies in the capital goods space.
Further, we maintain a positive view of the Indian pharma sector on account of improved earnings outlook which is driven by performance improvement in the US generics market, decrease in raw material costs and market share gains for companies through new product launches.
Lastly, building materials as a space look quite interesting given the robust activity in the real estate space, especially housing.
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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.
