Budget 2024: ETMarkets Smart Talk: Allocation towards Atmnanirbhar Bharat, infra and digitisation likely in final Budget 2024: Sandeep Raina

In an interview with ETMarkets, Raina said: “We expect some minor volatility in 2H2024; however, it will likely be a stock picker’s market rather than a broad-based rally, which we have seen over the last 15 months,” Edited excerpts:

June has been a volatile month for the Indian market, but bulls managed to keep the momentum going and pushed benchmark indices to fresh record highs. What is fuelling optimism?

The markets are reacting positively in anticipation of a good budget with a focus on infrastructure spending and the reappointment of key ministers has been perceived positively.

Policy continuity irrespective of coalition government are the key driver for strong market performance according to our understanding.

We also believe that there is a possibility of socialist policy in the upcoming budget which is leading to some consumption story coming back. We have also completed 6 months of the year 2024 – how is H22024 looking? What are the important trigger points that investors should take note of?
After the recent sharp move, we expect some minor volatility in 2H; however, it will likely be a stock picker’s market rather than a broad-based rally, which we have seen over the last 15 months.

The Indian Budget, monsoon, and US Fed actions will be key factors to watch, along with valuations for the broader market.

Above all, corporate results will be the main driver of market movement and action. Overall, we remain positive on the market.

The market is breaking new records every day and retail investors are buying the dip – the one like we saw post elections. How are retail investors picking stocks? What are the trends you have seen in your fund house?
We think retail investors, especially HNIs, remain bullish on the market and are buying key stocks in the sectors that are performing well. The sectors of interest include power, renewables, water, and capital goods.

How are earnings likely to pan out in the next 6 months? A recent trend suggests that prices have run up ahead of earnings upgrades.
If you look at FY24, earnings grew by +25% and we believe 15%-16% EPS CAGR driven by Cyclical, Export and domestic manufacturing. Markets are never in equilibrium; there is always greed and fear.

Therefore, based on the performance of the last six months, we expect some consolidation. However, looking at the next 12-18 months, the growth in earnings appears promising.

What are your expectations from the Final Budget 2024?
As mentioned above, we do expect some socialist policies like increased welfare schemes and MNREGA allocations.

However, the Modi Government has consistently focussed on Infrastructure, Atmnanirbhar Bharat and digitisation which will continue to see higher focus in Budget 2024.

How are FIIs looking at Indian markets?
Over the last 2 years, FIIs have remained net sellers. However, in the last 10 days, FII investments have turned positive. We observe FIIs in two different categories: EM feeder funds and India-focused funds.

EM feeder funds are experiencing outflows due to weakness in the Chinese market, despite strong fundamentals or views, necessitating a reduction in their Indian allocations.

On the other hand, India-focused funds continue to be net buyers based on our channel checks.

What about small & midcaps? Are there still stocks available at attractive valuations considering the run up we have seen in this space or does the valuation methodology have to shift now?
SMID is a vast sector basket. It includes PSU/manufacturing (which has performed well), IT (which has not performed well in the last 18 months), consumer (just gaining momentum), and chemicals (showing some green shoots).

Unlike the NIFTY50, which is concentrated in a few sectors, SMID is well-diversified. Therefore, we still see opportunities in IT, consumer, and chemicals where earnings downgrades have ended and growth prospects for FY25E are promising.

What are the themes that will be in focus in the next 6 months?
We still believe infrastructure themes like capital goods, power renewables, and water will continue to perform well.

Another interesting sector to consider is waste management. Additionally, any positive surprises in chemicals, mid-cap IT, and consumer earnings could make them attractive investment themes.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)