Dalal Street Voice: Infrastructure-led and capital goods companies ought to do well post-Budget 2022: Donald D’Souza of Equirus

Donald D’Souza, Managing Director & Co-Head Investment Banking, Equirus said that infrastructure-led and capital goods companies ought to do well -- metal companies and real estate too should also lookup. CV companies can also benefit longer terms from the emphasis on road building.

In an interview with Zeebiz's Kshitij Anand, D’Souza said that equity cult in India is just about getting stronger and the granularity (hence higher sustainability) of monthly mutual fund flows should provide sufficient cushion for any large drawdowns. Edited excerpts:

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

A) I would rate the budget at 4. This is one of the most progressive that we have seen in the recent past

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

A) Markets tend to get driven by expectations of growth and incremental liquidity. Budget Day's reaction was a very positive one from a market standpoint.

The intent of the government is pro-growth and equity markets like the actions of policymakers. Clearly, apart from growth what markets tend to get driven by is incremental liquidity.

If one were to broadly break this up into global (FPI) and domestic (DII) flows – the global portion will likely get affected by the less accommodative stance of the US Fed and EM flows, and India-allocations may drop.

However, one must also look at the domestic led flows, where only the SIP volume over the past 4 months has averaged around Rs 10,000 cr. So, there seems to be a buffer or a floor to where India indices may land.

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

A) We think there seems to be a thesis that the fiscal math can add up after the qualitative aspects of growth are taken care of – the emphasis on Capex, infrastructure, EVs leads us to believe that the focus of policymakers is the long-term productivity.

The lack of large populist measures and the absence of any significant tax changes seems to only corroborate that.

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

A) Infrastructure-led and capital goods companies ought to do well -- metal companies and real estate too should also lookup. CV companies can also benefit longer terms from the emphasis on road building

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

A) Broadband and mobile internet in rural areas – this one measure when implemented well along with increasing affordability of feature phones can make a significant difference in the financial services landscape of the country.

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

A) The share of renewables in power generation has been consistently on the up move for the last 5 years.

This government, we think, appreciates the relevance of renewables and technology and the moves announced yesterday whether in the EV space (the battery swapping policy, for example) or the renewables space (the additional funding for PLI for manufacturing efficiency solar modules, Sovereign Green Bonds).

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 hike in US Fed?

A) The logic of flows has been - improving the US economy, likely higher inflation, increase in bond yields, hardening of the US dollar, and drop in EM flows, and consequently India allocations.

But, as we said earlier, the equity cult in India is just about getting stronger and the granularity (hence higher sustainability) of monthly mutual fund flows should provide sufficient cushion for any large drawdowns

(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.)