1 day Ago
Sunil Subramaniam , Market Expert, says employment generation plus getting money down to the bottom of the pyramid are the two triggers we will look for in the Budget. If they come through, we could see a post-Budget rally . We have seen a rebound in the markets on Tuesday.
Could some more pain be in store for us or has this recovery just started for the Indian benchmark indices, at least for now to start with, and maybe we could be in for some pre-budget rally as well? Sunil Subramaniam: I am not so sure about that. The bounce today that you saw was probably some value buying from the domestic institutions. I saw that they are sitting on quite a bit of cash.
And in fact, over the last few days, they have been booking profits on mid and smallcaps, that is why you see the fall in the mid and smallcaps has been over the last few days much more than in the largecap. The increasing cash allocation in the domestic space is probably getting deployed into specific largecaps where the correction has brought it down to a reasonable valuation level. I would not call it bottom fishing, but buying some stocks on the downtrend and the real deployment of cash will happen only after the two events, which is the Budget as well as the RBI policy to follow soon thereafter.
Of course, on the 31st, we will have the economic survey come out, which will give you a sense and paradoxically what will happen is that a slowdown, if it is confirmed by the economic survey, to that extent, the chances of an RBI rate cut go up, so which will be positive for rate sensitives and the banks and all of that. So, some of the buying in the banks, I would attribute to that. The earning season is reflecting the fact of the slowdown and so better chances of a rate cut and so some number of buying into that.
This is just like I said, very selective buying in places where the correction has happened. I would not call it a bounce back on a sustained level yet. But once the dust settles down, do you think there are pockets in the market which have now become a value buy? Sunil Subramaniam: See, value is a very relative term.
If you see, the mid and smallcaps are trading at a 50% plus on a valuation above the largecaps. Clearly the whole largecap space is relatively a value buy. The second aspect here is that consumption because FMCG valuations look very high, purely on a PE basis.
But they are traditionally a high valued sector and relative to that over the last year, that has been a sector which has not performed, whereas in the budget I expect the government to put more effort around, say, raising the tax threshold so that more people do not pay tax. They will also put some money down to the bottom of the pyramid. Stock Trading Maximise Returns by Investing in the Right Companies By - The Economic Times, Get Certified By India's Top Business News Brand View Program Stock Trading Market 104: Options Trading: Kickstart Your F&O Adventure By - Saketh R, Founder- QuickAlpha, Full Time Options Trader View Program Stock Trading Technical Analysis for Everyone - Technical Analysis Course By - Abhijit Paul, Technical Research Head, Fund Manager- ICICI Securities View Program Stock Trading Stock Markets Made Easy By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Renko Chart Patterns Made Easy By - Kaushik Akiwatkar, Derivative Trader and Investor View Program Stock Trading Market 101: An Insight into Trendlines and Momentum By - Rohit Srivastava, Founder- Indiacharts.
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So, banking and consumption. Banking because as I said, slowdown in the economy is indicating that there could be a rate cut possibility definitely from RBI. These two sectors have not performed in the last one-year.
Returns for both have been laggards compared to the broader market, so that is the space I would say, if at all any buying can occur today, there is a downside, say margin of safety at the bottom and if some positive triggers come through in the two events, then there could be a rally there. If you can help us with your expectations from the auto pack, given the sell-off and what do you make of the auto sector as a whole? At this price point, any particular segment that you are betting big on? Sunil Subramaniam: I think auto is a good space to buy post the corrections because it is a rate sensitive sector. It is the ultimate rate sensitive.
Like I said, the build-up for the RBI policy is turning positive. So, if there is any good news on the rate cut front, auto as a pack should rally. The second aspect which I would like to focus on is auto components.
I think the export story has been very good. And I think increasingly you will find it is not necessarily to the US, but to the other emerging countries, I see a good future for that. Auto components are a big pick for me.
But I would still go slow on the heavy commercial vehicles and the tractor segment because we are nowhere close to a monsoon-related rally. You Might Also Like: Trump rains on what could be FM’s victory parade in Budget this year: Swaminathan Aiyar But in the car space, the K-shaped recovery will sustain for some time. So, I like high-end SUVs and EVs.
There has been a lot of capacity creation in EVs this year. There will be a massive push on new EV launches. So, I will be positive on the EV space within the car segment.
What does the market anticipate from the Budget on Saturday? Sunil Subramaniam: Finally the government has to focus on getting money to the bottom of the pyramid that is very clear. And so to me, I expect that there is enough room within the fiscal space for the government to allocate to revenue and stuff which trickles down to the masses. So, whether it is a tax rate cut or increasing the slabs where the tax levels are there, that is one positive we expect from the Budget.
The second is some diversion from the capex side in two parts. One is you actually take money off capex and put it down the revenue stream. Rating agencies may not like it, but you have got to drive a balance.
The second is even within capex, the developmental capex that they do, they should do it in areas where the money trickles down to the mid and small enterprises and to the thing because labour creation happens only at that space. So employment generation plus getting money down to the bottom of the pyramid are the two triggers we will look for in the budget. If they come through, we could see a post-Budget rally.
You Might Also Like: Markets yearn for another Sitharaman spark: Will history repeat this Budget? No wonder then that right now maybe and especially given the under ownership within FMCG, a slight nibble into the sector would be beneficiary. One can see that tilt in the market already. Sunil Subramaniam: Yes, I think that is sustainable because the other aspect there is that people have been putting off buying because of consumer sentiment and the Budget could prove that kind of a trigger there and hence, consumer staples is something and there is margin of safety there because they have already not really performed over the last one year.
So, you are not going to take much of a risk there. Domestic institutional investors will definitely start accumulating in that space in the coming weeks. (You can now subscribe to our ETMarkets WhatsApp channel ).
