Budget and Markets:may give more importance to populist measures: Nischal

Budget may give more importance to populist measures: Nischal Maheshwari

As the markets approach the budget scheduled to be announced on July 23, NISCHAL MAHESHWARI, chief executive officer for institutional equities at Centrum Broking, tells Puneet Wadhwain an email interview that Indian markets are giving tough competition to other emerging markets (EMs) to attract foreign inflows, but are disadvantaged by elevated valuations. Edited excerpts:

The markets are now at the cusp of the budget. What proposals can surprise them positively and negatively?

Currently, the government is well positioned as their receipts have been robust on the back of buoyant tax collections and an over 100 per cent dividend transfer from the Reserve Bank of India (RBI). With a rather slow first of the calendar year 2024 (H1-2024) due to elections and the monsoon season, the government is unlikely to make significant changes in its capex spending. However, we believe that higher-than-expected importance would be given to populist measures this year, thereby addressing the employment levels and rural stress.

How should investors approach the budget? Is it time to buy the domestic economy-focused sectors?

With the rural economy poised for a significant rebound and the government's emphasis on infrastructure and manufacturing, we anticipate continuation in policy making here. The forthcoming budget should prioritise rural revitalisation through various initiatives, therefore, it is advisable to focus on rural-driven consumption themes. 

Additionally, given the favourable monsoon season, increased attention to the agricultural sector is advisable. Investors should also consider sectors that stand to benefit from the government's infrastructure push, as well as potential advancements in the defense sector, which remains a key area of focus. Overall, a diversified approach encompassing these growth-oriented sectors could prove beneficial.

Are the markets a bit worried about how the Bharatiya Janata Party (BJP) will carry out reforms and big bang policy overhaul in such a large coalition?

Even though the BJP wasn’t able to garner a majority on its own, it is important that it has formed the government with its pre-poll partners and is not a post-poll alliance. This signals continuity in governance and policy making. Moreover, with incumbent cabinet ministers continuing to manage their existing portfolios gives us confidence for stable policy continuation for the next five years.

Is there a worry somewhere lurking in the minds of investors that the government may not last the full-term given the size of the coalition, and the fact that somewhere down the line these coalition partners may extract their pound of flesh?