After an extremely volatile session, Indian indices ended the Budget session on a mixed note. Sensex ended 0.27 percent higher while the Nifty ended 0.26 percent lower. However, overall, the Indian market was pretty pleased by the Budget with the Nifty jumping 310 points and Sensex surging over 1,200 points in intra-day deals on Wednesday. However, in the latter half of the session, the market pared gains as the focus shifted back to the US FOMC outcome and the Adani-Hindenburg episode.
Among the key highlights of the Budget were an increase in the income tax rebate limit from ₹5 lakh to ₹7 lakh in the new tax regime and an increase in capital investment outlay for the third year in a row to ₹10 lakh crore. Despite the increase in investment outlay, the fiscal deficit for FY23 was maintained at 6.4 percent of the GDP, which was positive, as per experts.
Now that the Budget is over, the focus of the market has shifted back to earnings and the upcoming RBI policy next week. What should your investment strategy be now? Let's see what different experts advise.
Sharekhan
"From an investor’s point of view, the Union Budget has further reinforced our conviction on the three investment themes of Capex, Credit & Consumption.
The Budget proposed a 33 percent increase in capital expenditure allocation to ₹10 lakh along with interest-free loans to the tune of ₹1.3 lakh crore to state governments for infrastructure development. In fact, the capital expenditure allocation has surged to 28.6% of revenue expenditure in FY2024 – more than doubling from 14% in FY2018 and highlights the improving trend in the quality of expenditure under the second term of this regime," highlighted the brokerage
In line with the three investment themes, its preferred picks are ITC, HDFC Bank, SBI, M&M, L&T, and Bharti Airtel among largecaps while in the midcap/smallcap it likes Cummins, Trent, Indian Hotels, Finolex Cables, Dalmia Cement, and GNA Axles.
IIFL Securities
Post the Budget, the brokerage said that it has maintained its focus on creating a balanced portfolio with a mix of companies that are likely to experience structural growth or benefit from the economic turnarounds. In terms of sectors, IIFL sees interesting opportunities in private sector financials, consumer discretionary, industrials and materials to participate in the domestic economic recovery.
It continues to maintain an overweight exposure to the secular segment and remains underweight in value traps across most of its portfolios. It is also overweight on cyclicals vs defensives and expects this trend to continue in the near term.
Kotak Securities
The Indian market is trading at a premium to other EMs. As per the brokerage, the Indian market is a 'Buy on Dips' market. It advises investors to allocate via hybrid funds such as Balanced Advantage & Multi-Asset Funds. Conservative investors can consider Equity Savings and Conservative Hybrid Funds, it suggested. It prefers exposure to equity funds via SIP as the route for new investors.
Prabhudas Lilladher
Post the Budget, Prabhudas Lilladher noted that it remains constructive on markets, although near-term volatility remains high given that India has been amongst the best-performing markets last year and remains relatively more expensive than many other competing markets.
"Inflation seems to have peaked out and the outlook on rural demand should improve over a coming couple of quarters. India is well placed given its more inward-looking economy with a large population and emerging middle class, significantly lower inflation than most countries, surplus domestic food grain production," said PL. It remains overweight on banks, auto and IT services and is underweight on consumer, NBFC and cement.
PL replaced Axis Bank with ICICI Bank in top picks since earnings quality remains stronger for ICICI Bank. It values NIFTY at a 5 percent discount to the last 10-year average PE of 20.7x on Dec 2024 EPS of ₹1,059 and arrives at Dec 2023 NIFTY target of 20,820. Bear Case – It values NIFTY at a 20 percent discount to its 10-year average and arrives at a target of 17,533 (16,828 Earlier).
Nippon India MF
The AMC noted that both from a cyclical and structural perspective, India seems to be better placed vs the rest of the world due to policy reforms in the recent past, government led capex focus, stronger corporate. Further, balance sheets have potentially created a robust platform for a virtuous cycle of growth, it added. Near-term global uncertainties are unlikely to wither away soon and the volatility can be potentially higher in the short run, predicted Nippon. It advises investors to have a long-term orientation for equity investments and said one should consider products based on their risk appetite. Conservative investors may consider asset allocation strategies, it added.
