'No ‘earth shattering’ reforms expected in Budget; bet on dividend-yielding stocks'

Investors can look at high dividend-yielding stocks such as ONGC, Hindustan Zinc, Vedanta which might pick up pace if there is some relief on the personal tax front, Umesh Mehta, Head of Research, Samco Securities,  said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

What are your expectations from the upcoming Budget?
There have been a number of infusions by the government to kickstart the economy in the past 6 months which has in a way tampered with the proposed fiscal deficit target of 3.3 percent of the GDP.

With so many injections already from their end, it is unlikely the Budget will bring about any other “earth-shattering” reforms.

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Umesh Mehta

Head of Research|SAMCO Securities

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However, there are expectations of some relief on the personal tax front and due to extended monsoons, subsidies for farmers could be another area that could be looked at.

Do you think the govt. will be able to meet this fiscal deficit target?

It is unlikely that the Government would be able to meet its fiscal deficit target this time. There are expectations that the fiscal slip would be as high as 3.7-4 percent.

This is however because of the fact that they have already taken a revenue hit by announcing the corporate tax cuts in October and are still struggling to meet their monthly GST revenue collection above Rs. 1 Lakh Cr.

Which are the sectors that are likely to hog the limelight in this Budget 2020 and why?
Agriculture, real-estate, fertilizers, infrastructure are a few sectors that are likely to be in focus this Budget. These labor-intensive sectors need attention in order to kick-start the economic engine and hence they would hog the limelight this Budget.

What are the expectations from Budget 2020 from investors or market perspective?
The market has most likely had already factored in many of the expectations. However, if there are any significant surprises in terms of taxes, subsidies or further infusions, then the market will definitely show a knee-jerk reaction.

Do you think infrastructure could turn out to be a strong beneficiary in the upcoming Budget?
Recently, the Government rolled out an Rs. 102 Lakh Crs blueprint for infrastructure development in order to revive the fate of the sector.

With this recent boost there seem fewer chances for an additional significant infusion as it would make sense for the Government to make progress with this initiative before magnifying the amplitude of relief/ policies for the sector. In fact, there could be further clarifications regarding the recent blueprint in this Budget.

The govt struggled to meet the divestment target in FY20. What are the estimates you are factoring in for the next fiscal?
The next fiscal will be more robust in terms of meeting the divestment target since the economy is expected to pick up pace as soon as the liquidity starts flowing back into the system. Suitable buyers should then start showing interest in these public sector enterprises.

What are your pre-budget picks?
A) Investors can look at high dividend-yielding stocks such as ONGC, Hindustan Zinc, Vedanta which might pick up the pace if there is some relief on the personal tax front.

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