Raghvendra Nath is the Managing Director of Ladderup Wealth Management
Since Covid-19 began spreading across India in March 2020, the government has been helping affected sectors and industries through various fiscal measures, including credit guarantees and subsidies. “Therefore, I do not think that the budget will have any significant measures for pandemic-affected sectors. I feel that the government is keen on expanding the ‘Make in India’ initiative,” said Raghvendra Nath, Managing Director of Ladderup Wealth Management, in an interview to Moneycontrol.
If the budget is pro industry, if there are no significant increases in taxes; if the budget signals higher growth and if the estimates for the next year are in line with expectations, the market will give a thumbs up and welcome the announcements, says Nath who has more than 18 years of corporate experience and a deep knowledge of financial markets.
Will the budget focus more on populist measures, especially ahead of State Elections, or will it be a growth-focussed budget?
Over the years, we have seen that most Central Governments maintain a good balance between social and economic objectives in the budget. So, I don’t expect this year will be any different. The budget should largely be growth oriented to further the momentum of the economic recovery.
In the last two budgets, we have seen that the government is actively listening to industry experts and addressing policy and taxation gaps. This budget should ideally further that exercise in bringing industry-friendly policies that can bolster overall economic growth.
Will the government focus more on sectors that generate more employment or sectors most affected by the pandemic?
After the pandemic hit India in March 2020, the government has been helping affected sectors and industries through various financial measures, including credit guarantees and subsidies. I therefore do not think that the budget will have any significant measures for the affected sectors. I feel that the government is keen on expanding the ‘Make in India’ initiative and we should hope that there will be some measures that can enable a substantial increase in capital expenditure by the private sector.
Infrastructure is one of the core focus areas for the government and we should expect some announcements related to that. After the repeal of the farm laws, which caused some embarrassment to the government, the budget may have some positive announcements for the farm sector in the budget.
What could be the surprising elements in the budget if any?
Tax collections during the last nine months have been quite robust and much ahead of budget estimates for the current year. There is a good possibility that the government may have a fiscal deficit number that is lower than budgeted and that could be a positive surprise.
What could be the factors that can drive a market rally on budget day or persuade FPIs to pump in money on budget day?
Equity markets have a habit of surprising and always react or rally when we least expect them to. So, it is near impossible to say what factors shall make the markets rally on budget day. Having said that, if the budget is pro industry; if there are no significant increases in taxes, if the budget signals higher growth and if the estimates for the next year are in line with expectations, the market should give a thumbs up and welcome the announcements.
How do you read the corporate earnings announced so far for the December 2021 quarter?
Generally, corporate earnings have been following the trends of the second quarter and are quite robust. I think this trend will continue for the next few quarters.
Beyond the Budget, what are the other important events or factors to watch out for over the rest of 2022?
On the global front, all eyes are on how the Federal Reserve acts in the United States as it reverses its easy money policy in 2022. This is also true for many other developed countries that have flooded their economies with liquidity. A faster-than-expected pullback of liquidity and tightening of rates can hit equity markets hard. From India’s perspective, how the RBI manages monetary policy and overall credit growth in the economy is something to watch out for.
Do you expect the market to give a double-digit return in 2022 and close the year above 21,000 on the Nifty50? Also in 2022, do you think the market will still be worried due to expectations of three rate hikes by the Fed, inflation and Covid?
We have had two amazing years in the equity markets driven by the economic bounceback, sharp earnings growth and high liquidity. While there is a good probability that 2022 may also see good returns, the returns will be more stock specific and not so much at a broader market level. Moreover, we should see much higher volatility in the coming months than we have in the previous two years.
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