Sachin Shah, Fund Manager, Emkay Investment Managers, said that investors will be happy if the direction on infrastructure capex, boost to consumption, and incentives to drive savings into financial assets is driven by the budget announcements.

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Shah has extended his 18 years of experience in the Portfolio Management space with Emkay. He has also played a pivotal part in the development of Emkay Portfolio Management Service’s proprietary module - E-QUAL RISK.

In an interview with Zeebiz's Kshitij Anand, Shah said that investor portfolios should have a decent allocation to the capital goods sector, investing in companies that provide industrial automation solutions, robotics, etc. in 2022.

 

Edited excerpts:
 
Q) Global headwinds seem to have gripped the Indian market. What is keeping the market volatile, and will the Budget act like a booster shot for the Indian markets?

A) Clearly, global macro risks on inflation, leading to the tapering of global liquidity and higher interest rates are playing out now across world equity markets.

Whereas most of the domestic data points suggest that the Indian economy is in decent shape and outlook is also encouraging.

Hopefully, once the global selling comes to a halt, the Indian markets will start taking into consideration the domestic positives and will see a rebound.  

Q) What are your expectations from Budget 2022? Do you think the government will be able to meet the fiscal deficit target?

A) When it comes to budget, I think most investors are always looking forward to the continuation and consistency of government policies as that gives the confidence in the direction and the intent of the government in achieving long-term growth objectives for the economy.    

Q) Any 4-5 things, which the government can introduce in the Budget that will most likely boost the markets?

A) Investors will be happy if the direction on infrastructure CAPEX, boost to consumption, and incentives to drive savings into financial assets are driven by the budget announcements.

Q) The December quarter earnings have been a mixed bag. What are your expectations from the earnings cycle in 2022?

A) We haven’t seen any major disappointments in Q3 FY22 (Dec Qtr) results. In fact, the biggest sector – BFSI – has delivered strong results, most of the leading private sector banks and insurance companies have reported strong profitability and healthy asset quality.

Even, the IT sector delivered strong numbers and the outlook was growth-oriented.

There have been some challenges with the FMCG sector, where they have witnessed some slowdown in the rural demand, but that too is expected to rebound with rabi season crop harvesting and the government spending expected to increase in the last quarter of the financial year.

We believe for the last few quarters, developments at the corporate level, government policy level, and overall ground-level demand, both in rural and urban India are pointing towards an all-around economic recovery and corporate earnings growth.

The recent high-frequency data indicators are all encouraging towards the same. This makes us believe that India Inc. is entering into a virtuous cycle of multi-year profit growth over the coming 2-3 years.

Q) The big theme, which has started to play out is the revival of the Capex cycle. From a portfolio standpoint – how should one play this theme across sectors?

A) In the recent quarter, there are some more affirmations (double-digit export growth) and geo-political developments’ (China+1 and China GDP slowing down) leading us to believe the potential for India’s manufacturing and exports are about to unleash and will probably turn out to be a multi-year high growth story for the Indian economy.    

We, therefore, strongly believe, portfolios should have a decent allocation to the capital goods sector, investing in companies that provide industrial automation solutions, robotics, etc.

Q) Value or growth – which theme will pick the momentum in 2022?

A) We strongly believe the Indian economy is about growth, and Indian stock markets respect the most, where there is growth. Nevertheless, in investing Purchase Price plays a critical role.

So, investing in companies that have the longevity of profitable secular growth for the longest possible periods and buying them at reasonable valuations is what creates sustainable returns & wealth for investors (minority shareholders).

Q) We saw plenty of stocks creating wealth in 2021 – but many failed to impress. Should one look at stocks coming out of quarantine because of lockdowns/curfew?

A) We do believe that there is a high probability of the Year 2022 going to be a year of the economy fully opening, from that perspective many businesses, which were impacted should see a sharp rebound in their business/commercial activities.

(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.)