Madam FM, don’t tinker with the Budget or with capital gains tax at all: Aveek Mitra

“I expect that Madam Finance Minister does not tinker with the Budget or with the tax at all. Uncertainty will remain and the market will react negatively if there is a tinkering on the negative side of capital gain tax,” says Aveek Mitra, Founder & CEO, Aveksat Financial

Will we see consolidation in the markets a day prior to the Budget and are we likely to see some sort of a tinkering on the tax front? If yes, will there be a major reaction in the markets?
I think the Budget will be okay. I would prefer it if there is no tinkering with the capital gain tax or things like that. The total Budget balance may not be very difficult for the government to do because the tax collections were very robust due to inflation and due to reopening of the economy. The tax collections were good, formalisation has helped, GST collection is also going at a record level regularly.

I expect that Madam Finance Minister does not tinker with the Budget or with the tax at all. Uncertainty will remain and the market will react negatively if there is a tinkering on the negative side of capital gain tax.

The other space which is seeing a bit of a movement at the moment is the entire platform company space. Nykaa has suddenly spiked 7%; Easy Trip Planners was already up since the start of the trading session and has gained 6%. What is your take on some of these new age tech platforms? Is there any preference amongst these names?
We track all these stocks but we do not have much investment apart from one and that is basically in the space of insurance. It is a disclosure that we own it and it is not an advice and we can sell it at any point of time if we find that the results are not good. So, this is the only stock for a discussion purpose.

I can say that we have made an investment. Apart from that, there are many stocks which are on our tracking list. We have nothing against those as the valuations are high. The prices remain volatile for all these stocks. We need to see that for a few quarters the results are coming good and we do not mind buying those stocks at a little higher valuation than what is present today.

But at the same time we want to see that first the overall market gets settled, the overall market volatility which has gone up and we have seen today more of the record volatilities and we just prefer to wait and watch for the time being and just see the storm settling about this FPO.

Let us see how the FPO works for Adani tomorrow. There is an issue that will happen as soon as tomorrow. After that, people can take positions on different stocks. As for the new age stocks, we have invested in one. We are tracking all. We like their business models but that does not mean that the valuation is on the right side.

Coming back to the point regarding the Budget you said that you are hopeful there would not be too much tinkering but on the positive side, if you were to take a bet with respect to which sectors would most likely benefit, which would those be? Will it be defence, industrials, power, capex or infra? Which is the theme that you like?
The defence part is a structural story. I do not think that anything special is going to happen in the Budget. But structurally, the defence sector will have a long time of positive run going ahead, it is our feeling.

Second, as far as the Budget is concerned, I would like to see that this infrastructure spending which the government has done and which actually has kept the GDP growth rate at the present level, continues for the next year too. Also I would like to see that there is a little bit more devolvement to the states so that the states can spend in a way where the lower section of the people, the people who are suffering due to inflation or low kind of job openings or low hike in salaries or incomes, get support.

That will in turn only be good for the market because that will actually help the FMCG sector and the consumer goods sector to perform better. Since this is the last full Budget before the election, the government will look into this area. And I hope in these two areas – devolvement with the states and infrastructure spending – the government spends and the quality of spending goes more towards capital rather than the revenue. We will look closely at how the revenue expenditure versus capital expenditure ratios move. We will look closely.

Where does your preference lie within the entire auto space?
The auto-ancillary space looks quite interesting and we feel that on a China plus policy and the Aatmanirbhar story, the sectors where already we have a good backbone created in the country and where the logistics backend supply chain are created,twill benefit first.

We feel there is a long term story in auto-ancillary space going ahead for a few years. I do not specifically expect anything particular because the PLI scheme is already there. There is no point in having human schemes running simultaneously other than if the policy level the things remain same, not specifically to the Budget and there is no tinkering of Budget or GST or anything like that on a very regular basis. The ease of doing business, moving the files in a smoother manner keeps happening and this has a long term runway..

Coming to financials, PSU banking names are seeing a bit of a profit-booking. We saw the numbers from PNB also come by. What's your take? Is the tilt more towards private lenders when it comes to risk reward?
We generally are not invested in PSU banks. We never have felt confident about holding these stocks for quite a long time because of one credit cycle. We have done very well in cleaning up. It almost took 10 years to clean up this balance sheet. But the point is that it may go up in the coming 10 years. We have no idea.

Also PSU banks have their own responsibilities towards funding projects, which sometimes may not look 100% economically viable or may not be touched by the private sector. But as an investor, we need to see that our investors are protected. So if at all we have to invest, I will invest into some private banks, basically into the smaller banks which are showing a quarter-on-quarter, good performance, good improvement in their books, good building up of the franchisee. Generally, as a policy, we are always lower in their weightage on the financial sector compared to the market.

When it comes to the IT sector, HCL Tech is the consensus buy from our technical experts. What about you? Do you like it as well?
We like the performance of the company and we are invested in some portfolios into this particular stock. This is a disclosure. But we can sell it anytime. Do not take it as advice. The IT sector on the whole has to be looked at specifically and the front end has to be looked at very carefully. There are opportunities which are emerging. If you want to have a safe environment to put your money in the situation of uncertainty and we are invested in a few.

What are the top capital goods or capex related themes based stock that you would like?
We are invested in quite a few of the capex related stories. Those are basically on the domestic focused capex. We are invested there with a two, three years' view.