What are your expectations from Budget 2024? Do you foresee significant capital expenditure and infrastructure boost announcements in this Budget?
The Budget presented for FY25F will be provisional and therefore high expectations may be difficult.
Fiscal deficit consolidation of 50bp year-on-year (YoY) will be keenly watched.
It should avoid the temptation for big populist schemes, before the electoral period.
Also Read: Budget 2024: any major sops unlikely, expect relief measures for rural sector, says Emkay Global’s Madhavi Arora.
We expect a silent allocation for the infra sector in FY25F on a larger basis from FY24, but there could be announcements for the next five years that can provide the road map for the sector.
Also read: Interim Budget 2024: 5 key things to watch out for
For defence, we expect spending to touch nearly 2 percent of FY25F GDP, representing nearly 13 percent of total government spending.
New energy incentives and EV subsidy scheme spending for the next three years will be anticipated.
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Which sectors could get some boost from Budget 2024?
Budget 2024 is likely to give a significant boost to the new energy, EV sector and the defense industry.
These sectors are expected to receive increased funding and support, reflecting the government’s emphasis on sustainable technologies and national security.
Also Read: Budget 2024 expectations: EV industry pins hopes on subsidy extension and GST reforms
What is your outlook for the market for the next six months? What are the main triggers that can move the time during this period?
The consolidation in the Nifty 50 index in recent weeks has come later than we expected.
The Nifty P/E (price-to-earnings ratio) valuation has increased only above the 10-year average level.
We feel that the sideways index movement will continue in the March quarter of 2023, which will be healthy to correct the excesses in the initial public offers or IPOs that are listed and in small-cap stocks.
Also Read: Nearly 60% of Nifty 50 stocks fall this month; 8 stocks fell more than 10%
We feel that a post-consolidation, healthy valuation, favorable global and local interest rates, as well as a favorable domestic political regime could provide positive momentum for equities.
We advance our Nifty 50 index target and improve the probability of a bull case to 65 percent, leading to a mixed target of 22,509 and a bull case target of 23,571.
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What are your Q3 earnings expectations of Nifty companies? Are you waiting for updates or downgrades?
Bloomberg consensus estimates expect a strong 17.6 percent YoY and flat QoQ EPS (earnings per share) for the quarter, with no major change in the high-growth sector leadership.
For our coverage universe consisting of 150 companies, we expect 23 percent YoY growth in PAT driven by 7 percent YoY growth in sales and 5 percent growth in EBITDA.
The first 6 percent of Q3FY24 results announced so far have been weak, showing 16 percent YoY PAT growth, leading to a 0.2 percent cut in Bloomberg consensus EPS for FY24F-25F.
This is the reversal of the EPS consensus update trend seen in recent months and should be noted.
Which sectors are you bullish on in the medium term? Can we still bet on financials and cars?
We have overweight ratings on auto, capital goods, defence, financial services, infra and cement.
The valuation of Nifty Auto has increased to close to +1SD above the 10-year mean, so we are becoming more selective on stocks.
Returns will be tied to volume growth or market share expansion, as best cost advantages are captured in profit margins.
The financials sector is currently overweight in our portfolio, driven by the prospect of net interest margins (NIM) bottoming out.
However, the conservative policy of the Reserve Bank of India (RBI) presents a challenge.
We favor non-banking financial companies (NBFCs) over banks, with a preference for HDFC Bank due to its favorable risk-reward profile.
Within the PSU bank basket, SBI is our preferred choice.
Inflation has cooled in the US but the labor market remains resilient. When do you expect a rate cut from the US Fed?
The consensus expectation is for three rate cuts in CY24F (calendar year 2024 forecast), which looks like a possible scenario.
Based on high frequency data, the expectations can moderate regularly and impact stock markets in the short term.
We feel that early rate hikes in the Fed’s April-June quarter may be favorable for equity markets in CY24F but increase global inflation risk for the first half of CY25F.
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Disclaimer: The opinions 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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Published: 24 Jan 2024, 11:17 IST