Consumption and rural plays should see an increase in allocation from the budget perspective. HUL is seeing good rural traction and other plays associated with a rural theme like Dabur, ITC or Escorts are likely to see increased allocation, Naveen Kulkarni, Head of Research, Reliance Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q. What are your expectations from the upcoming Interim Budget?
A. This is a crucial period for the government before it completely gets into an election mode. We are expecting a full budget this time. Ahead of the election, we may see the budget announcing some sort of farm loan waiver, rural stimulus and ensuring a rise in minimum support price (MSP).
The budget will continue to be an important tool for the government to communicate its economic, as well as social agenda and some excitement around it, is still warranted.
Q. Do you see a knee jerk reaction if the government is unable to meet its fiscal deficit target?
A. Some amount of slippage is expected but the degree of slippage will be critical. Our estimate is the fiscal deficit for FY19 is 3.5 percent and the government should be able to meet that. Any number significantly higher than the market consensus is likely to see a knee jerk reaction.
Q. The FM in a speech highlighted that the government would address issues confronting the farm sector. What kind of sops are you factoring in your estimates?
A. Populist measures are likely but it will depend on the quantum and execution of measures. This government has been prudent and fiscal prudence has been the hallmark of this government’s measures. We believe there will some populist measures but may not derail the government’s finances significantly.
Q. What according to you should be ideal portfolio allocation ahead of Budget?
A. Consumption and rural themes should see an increase in allocation from the budget perspective. HUL is seeing good rural traction and other stocks associated with a rural theme like Dabur, ITC or Escorts are likely to see increased allocation.
Q. Any 5 stocks which are likely to benefit the most from the upcoming Budget.
A. HUL, ITC, Dabur, Colgate, and Escorts—all stocks associated with the rural theme are likely to be in focus.
Q. Historically, which are the sectors that have been in limelight ahead of the Budget and what are you recommending your clients and why?
A. Historically investment theme has been in focus and last year’s budget has seen more rural focus. We do not believe that investment is likely to see any renewed push in this budget. Consumption is likely to be the focus area.