ETMarkets Smart Talk: Planning to spend Rs 10 lakh post Budget? Divam Sharma highlights sectors to invest

“If you look at current markets, we suggest a 100% allocation in a month. There is a huge investment opportunity coming from this market correction,” says Divam Sharma, smallcase manager & Co founder, Green Portfolio.

In an interview with ETMarkets, Sharma said: “Allocation could be made towards stocks in the chemicals, textiles, infrastructure and capital goods space” Edited excerpts -

What is your take on the Budget 2023? Do you think the govt was able to walk the talk and keep the growth agenda in mind?
Yes definitely, it was a very balanced budget with growth as the north star. Long-term infrastructure creation, focus on human capital development, and ensuring a GDP multiplier effect from agri-sector spend and tax rate cuts remained in focus.

With infrastructure creation, we are doing what China did post Asian Financial Crisis and Global Financial Crisis. China spent USD 200 billion during 1997 Asian crisis and USD 700 Billion during the 2008 Great Financial Crisis. Even though not of the same magnitude, the trajectory is similar for India.

Post Budget what is the kind of impact you see on markets? Where do you see the markets headed?
If you look at the economic survey and then the budget, the outlook is very positive to ensure that India delivers over 6% Real GDP growth over the coming years.

We have been expecting a correction post budget as we discussed in prior interviews.

Short term, markets are in a tussle between the FPI’s which are shorting the markets, and the DII’s who are buying the dips.

Also, there would be some reallocation of India holdings for global funds considering developments around the Adani group.

All in all, the GDP growth, consumer market growth and the export opportunity presented will continue to drive the market higher in the long term.

Which sectors are likely to benefit the most from the Budget 2023?
Automobile sector will benefit from the scrapping of Government vehicles and higher disposable income for the taxpayers. Thrust on infrastructure, logistics will push CV’s.

Infrastructure and allied sectors should benefit from the higher budgetary allocation.

The consumer discretionary sector should benefit from a higher disposable income from the tax cuts.

Do you think the Budget 2023 had something for the common man?
This budget will ensure tax savings of up to 25%. This should ensure a higher savings and should also positively impact discretionary spending.

The focus is on a new tax regime with a higher standard deduction while the slabs in the old regime are also rationalized.

Insurance deduction disallowance of over Rs. 5 lakhs is a dampener as tax incentive is a big value for investing in insurance.

How will Budget 2023 impact investors' community?
The budget reassures India’s stand as a strong growth economy. The targeted fiscal deficit of 5.9% for FY23-24 and 4.5% for FY25-26 will be a huge positive for the economy.

The impact on GDP growth from capital expenditure, thrust on agri sector, and tax cuts will be seen over the coming year.

Also, there were no negative surprises in this budget, especially on the capital gains tax front.

Considering the comfort of current valuations, and positivity around the budget announcements, it is further reassuring for Indian equities to offer huge wealth creation over the coming years.

Which stocks are likely to benefit the most from Budget 2023?
We like Titagarh Wagons, CESC, Adani Ports, JSW Energy, and Sterlite Technologies which can benefit from the developments around budget announcements.

What should be the investment strategy for long-term investors post Budget considering he/she wants to put around Rs 10L?
If you have 10 lakhs to invest, under usual market conditions we would have asked you to stagger your investments over the next 3-4 months.

But, if you look at current markets, we suggest a 100% allocation in a month. There is a huge investment opportunity coming from this market correction.

The allocation could be made towards stocks in the chemicals, textiles, infrastructure, and capital goods space.

How do you rate Budget on a scale of 1 to 5 and why (5 being the best)
We would say, it’s a 5. The FM has given a very balanced budget and has ticked all the right boxes in managing the fiscal deficit, looking at long-term growth, managing the expectations of taxpayers, and allocation towards the agricultural sector. We are more concerned with how the country’s growth is aided and how it would effect our holdings, which then, yes, it’s a 5.

FIIs have been nervous ahead of the Budget 2023. How do you see flows panning out in the year?
The FPI flows to India are inevitable now. India is the most lucrative market among the EM pack and will continue to enjoy a higher allocation in the MSCI index.

As the interest rates start reversing, we will see flows to equities and EM’s have been treating the money better than DM’s so we will see high flows to EM’s. There are immediate challenges concerning governance and particularly Adani, which shall eventually fade.

With the Budget over, US Fed commentary will be an important factor in deciding the trend. What is your take on the US Fed action?
25 bps is factored in by the markets. The Fed will be pushing back against the market expectations that the markets will begin pivoting.

Terminal rate of 5% is being factored in and any comments hinting a lower interest rate will lower US yields and will be supportive for our markets as FII’s reallocate to India.

Although, we see that this should not be a major impact on Indian markets and we will take more cues from domestic factors.

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