Dalal Street Voice: Populist measures expected in Budget 2022, amid impending UP, Punjab elections: Ashutosh Tiwari of Equirus

Ashutosh Tiwari, MD Equities at Equirus said that he expects the Budget to remain focused on investment revival like last year as revival of manufacturing sector is critical for job creation in the country, and with UP and Punjab elections around, there is the possibility of some populist measures being taken.

We believe that Capital Goods, Industrials, Defence, Real Estate and Building materials will be other sectors in focus based on our belief of pick-up investments over the next few years in India, says Tiwari.

Edited Excerpts:

Q) Equity market will be able to close the year with gains of over 20% despite a volatile first half of December. How do you see market trading in 2022?

A) After a long time, we are seeing signs of pick up in CAPEX cycle in India. The last major CAPEX cycle in India was during 2003-2009 and was driven by sectors including metals, power, infrastructure and real estate.

With metal prices at decadal highs, companies in the sector are witnessing massive deleveraging of the balance sheet which will lead to new CAPEX by them.

During the last cycle thermal power CAPEX was a big driver; however, it may not be as high as the last cycle but still pick up, especially in the renewable space for reducing India's carbon footprints.

We are already seeing a pick-up in infrastructure spending driven by government initiatives. Real Estate has also picked up post-COVID and we believe that after almost 10 years of downturn in the sector a cyclical recovery is likely on the cards.

Moreover, new Performance Linked Incentives (PLI) schemes by the government will also drive capex revival. Balance sheet of corporate sector appears in a far better space today along with clean-up of bank NPAs. The industry is in a better position to leverage for the next manufacturing capex cycle over the next few years.

Q) The November MF data is encouraging as SIP tops Rs 11000 cr despite benchmark indices closing lower. What is your take on the kind of money pouring in from MFs?

A) Indians have traditionally made major savings in debt instruments and gold. However, with better information flow driven by the internet, people are now better equipped to compare returns of different asset classes.

Youth has a higher propensity to take risk compared to earlier generations and therefore equities as asset class is going to only grow from here.

People have also made good returns post-COVID fall last year, and hence recent memory of returns is also favourable in people’s minds. We believe that SIP flows will remain strong.

Q) Which sectors are likely to hog the limelight in 2022 and why?

A) As we believe in the CAPEX recovery theme, we think that Capital Goods, Industrials, Real estate, and building materials will be the sectors that will do well in 2022.

Q) What are your expectations from Budget 2022? Any particular reform which investors’ are eyeing from market and economic perspective?

A) We expect the budget to remain focused on investment revival like last year as manufacturing revival is critical for job creation in the country.

However, with UP and Punjab elections around, there is a possibility of some populist measures in the budget.

Q) We are at the close of the year 2021 and a lot of global investment banks have highlighted how expensive valuations are, after the recent rally. How do you see that playing out in 2022?

A) While the market might look expensive from an FY22 earnings perspective, we believe that markets will move in an upward trajectory as we expect revival in investment, in years ahead.

With UP and Punjab elections in early 2022, maybe market will remain rangebound till elections, but post that there will again be rally.

Q) We saw over 60 mainboard IPOs so far in the year 2021, compared to 14 in 2020. What is the trend that you see for the next year?

A) We believe that the IPO pipeline will remain decent in 2022, but unlike as was in 2021. In some of the recent IPOs, Mutual Fund participation in Anchor books have already come down and therefore deals at unreasonable valuation will not happen.

Q) Do you see more tech-based businesses making their way into equity markets? Which other sectors and companies could be in focus, going forward?

A) Digital is making way in all aspects of our life be it shopping, payment or education. The trend is picking up in remote rural areas, as well.

COVID has further accelerated this process and therefore we are definitely going to see more tech-based business IPOs coming in.

We believe that capital goods, industrials, defence, real estate, and building materials will be other sectors in focus in view of pick-up in investments over the next few years, in India.

Q) What are your views on the small & midcap stocks? Do you foresee a year of consolidation in the broader market after the recent rally?

A) It's time to be selective and invest in stocks where valuations are attractive. We still find many stocks in small-cap space where valuations are attractive and therefore believe that next year also money will be made in Small caps.

Q) Govt plans to go big on the Semiconductor business. Which companies are likely to reap the benefit?

A) Investment in semiconductors will take time and most likely a major part of this will captured by MNCs

Q) What is your take on FII outflows? What are they most worried about?

A) While there is FII outflow from the broader markets, at the same time they have also invested a lot of money in new IPOs and therefore we are not too worried about that part. India manufacturing is going to see an upcycle and therefore it’s a matter of time when FII net inflows in markets will start.

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