Dalal Street Voice: Bottom-up stock picking and portfolio sizing would drive returns post Budget 2022: Naveen Chandramohan

I continue to be optimistic from a growth perspective with regard to the markets and think that bottom-up stock picking and portfolio sizing would drive the returns, Naveen Chandramohan, Founder & Fund Manager – ITUS Capital – said in an interview with Zeebiz’s Kshitij Anand.

Chandramohan has had an illustrious career spanning 15 years in the financial services sector. Prior to setting up Itus, Naveen was the Responsible Officer and Fund manager and Hutchin Hill, a USD 4.5 bn fund where he managed capital out of their Hong Kong office.

I continue to believe that roads, construction, and logistics will have an impetus in terms of capex allocation over the next 3 years, he said.

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Q) On a scale of 1-5 – how to you rate the overall Budget and why. (5 being the best)

A) I give a rating of 4.5 to Budget 2022. To me, the role of a budget is to bring the following –

a) No uncertainty around the future
b) Focus on growth
c) Provide impetus for the govt balance sheet to spend on infrastructure and logistics which will create the conduit for private capex on top.

I believe the government has delivered on all 3 fronts.

Q) Where do you see markets headed post Budget 2022? What will be a bigger driving force – US Fed or Budget allocations?

A) I think it is important to define the two first. From a US Fed perspective, while the liquidity in the system will slow, it is important to see how aggressive they go in contracting the balance sheet.

My view remains that the US Fed would not do anything to derail growth, at the cost of a recession.

From a micro perspective, the budget path has been laid out. I believe the drivers of growth are clear in this regard.

We are set up for the drivers to continue a high single-digit growth rate over the next 3 years from here.

I continue to be optimistic from a growth perspective with regard to the markets and think that bottom-up stock picking and portfolio sizing would drive the returns.

Q) How do you see the government managing its fiscal math?

A) I believe the government has presented the math in a conservative way. I personally think that our fiscal deficit will be within 6.5% of GDP.

In fact, I can see it come to 6% of GDP in an aggressive scenario. Where does the upside come from?

I believe the tax collections (direct) will be a lot better than the forecast in the budget. I would not worry currently around the deficit today, as the impetus is on growth.

Q) Which sectors are likely to benefit the most from Budget 2022 and why?

A) I continue to believe that roads, construction, and logistics will have an impetus in terms of CAPEX allocation over the next 3 years.

This will lay the path for manufacturing-based sectors to drive additional private capex over the next 3 years.

Q) Any announcement you thought it stood out from the Budget speech or document?

A) I liked the government’s implementation of the crypto tax. They acknowledged the fact that digital currency will drive democratisation of the currency going forward and more importantly set a path for potential tax receipts to be collected from a trading perspective.

Q) How do you see the renewable space in the year 2022 post Budget announcements?

A) The government acknowledges the role and adoption of EVs in the country today. The abundant availability of EV Charging infrastructure would be one of the key drivers of higher electric mobility adoption.

The battery swapping technology will continue to see a major impetus in terms of focus areas over the next few years.

I think you will continue to see policies drafted towards better adoption for EVs (both distribution and penetration)

Q) What is your take on December quarter earnings so far?

A) There have been strong earnings and growth across the board in IT, tech, consumer, real estate and the banking industry.

Many of the businesses in these sectors continue to grow their cash flows at a CAGR in excess of 20% over a 2Y period. Pharma has been mixed, especially around US generics and auto has been mixed due to supply chain disruptions.

While the Nifty earnings growth continues to be robust, I maintain that the next few years will be stock-specific growth stories rather than talking about the market as a whole.

Q) FIIs have remained net sellers in the last 3 months at least in the cash segment and January is no different. What is the likely trend – in light of the hike in US Fed rates?

A) It is important to take a step back and see that FII has been net sellers over multiple years now. Most of the selling pressure has been absorbed well through a combination of domestics and retail.

This bodes well for the Indian markets at large. I do hope that investors take a step back and look at longer-term trends rather than react to quarterly trends of FII flows.

The trend in 2022 is expected to show cyclicality inflows with at least 4 rate hikes priced in today. However, it would do investors great benefit to focus on the fundamentals on the ground rather than react to the flows.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)