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  • 1/25/2024

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00:00 With the caveat that if you look back to 2019 pre-general election budget and then look
00:06 at what was presented post the election, there was not too much of a change, which is why
00:11 perhaps it makes sense to take the first Feb announcements seriously.
00:16 So what's expected?
00:17 Largely, and this is we've taken from the number of house views out there, this is we've
00:21 taken from the number of house views out there, CAPEX is expected to slow down compared to
00:28 the last few years.
00:29 So the pace will be 10 to 15%.
00:31 This is government expenditure, government CAPEX, which is in itself not that slow.
00:36 But if you compare to the huge rates, a cagger of about 25 to 30% of CAPEX that you've seen
00:43 in the last few years, there will be a slowdown.
00:46 The reason is that you need to achieve your fiscal deficit targets, which is 5.9% for
00:52 this year.
00:53 And then of course, a glide path going down to FY26.
00:56 What else can we see?
00:58 What is expected is because this is a pre-election, you will see an increase in the PM Kisan schemes.
01:04 That's the money which goes directly to farmers accounts.
01:08 And that could increase by 50% to 9,000 rupees.
01:12 It's currently 6,000 rupees per annum.
01:14 There is also a thought on the street that there could be a rise in exemption limits
01:19 because the new tax regime is not looking as attractive.
01:24 Having said that, the question is which sectors and companies will see a complete boom?
01:30 Let's take you through the kind of run up we've already seen in key government run organizations,
01:36 as well as sectors which have improved or seen a kind of a boom because of government
01:41 spends.
01:42 I'm going to start with railways.
01:44 And remember, there was an expectation that you'll see a huge bump up in the railway allocation,
01:49 which is already at record highs at 2.4 lakh crore rupees.
01:53 And look at the way railway stocks have really seen a rise in the last one year, starting
01:58 with IRFC.
01:59 This is all in percentage terms and for about a year.
02:03 You've already seen a run up.
02:04 Can you see more is the question.
02:06 Defense is the other place that we should keep our focus on.
02:09 What will the outlays be?
02:11 It is government policy that defense has to be focused on more make in India.
02:15 And you've seen the likes of Mazgaon Dock and HAL, all of them seeing massive increases,
02:22 or nearly 200 percent on Mazgaon Dock.
02:25 Is there more steam left?
02:26 Which companies and which sectors should you look at?
02:29 The other space that I would talk about is definitely renewables and renewable energy.
02:34 A big, big focus.
02:35 And you've already seen the solar panel plan implementing and sort of reacting in stocks.
02:42 Look at a Suzlon, 322 percent in the last one year.
02:47 Inox, wind, Orion Green, JSW Energy and a lot more possibly to come.
02:52 Is there more steam left and more energy left is the question.
02:56 I would also talk about fertilizers, always in focus, especially in a pre-election budget.
03:00 You need to make it easier for the agri sector, for the rural economy to get fertilizers at
03:06 a cheaper rate.
03:08 Will we see action there?
03:09 You already have seen quite a bit of run up.
03:12 FACT up 146 percent, even a Chambal fertilizer at 15 percent.
03:17 Now comes the question.
03:18 So what should you do before the budget?
03:21 What should your portfolio look like?
03:22 What are the key stocks that you should pick?
03:25 We're going to be speaking to top experts to understand their point of view.
03:41 Let me introduce our speakers today.
03:43 Deepak Shanoi, founder and CEO at Capital Minds joins us today as does Ajay Bhatka,
03:48 market expert.
03:49 Welcome to both of you.
03:51 Thank you so much for speaking with us on NDTV Profit.
03:54 Absolutely kicked to have you on our pre-budget shows.
03:57 Deepak, let me begin with you.
04:00 And do you agree with the stake that not a great idea to write this off as just an interim
04:07 budget, because if you see the track record, this government puts in place an interim budget
04:13 with the full intent that they're going to come back and implement it.
04:17 Now whether they do or not, we'll have to see.
04:19 But that is the intent when that interim budget goes out.
04:22 Yeah, it is actually, to be honest, I think it's not going to be that big a set of announcements.
04:29 There's a problem with doing a lot of announcements right now, you know, in just in case, because
04:37 if you do it and then for whatever reason, there is a need to include other political
04:42 parties eventually.
04:45 People may not agree with whatever measures are actually in the vote on account and therefore,
04:51 you know, there will be a fear that, you know, that thing will get changed later.
04:57 Also, economic situations will change quite dramatically.
05:00 What will happen is the budget comes, next budget comes in, the real budget comes in
05:05 July.
05:06 The financial year would have already started.
05:08 So essentially, that budget gets like nine months to be operational.
05:12 And introducing any tax specific measures at that time would actually create a lot of
05:19 problems.
05:20 So for instance, lower taxes, change in taxation structure and so on, will become problematic
05:25 to introduce in July.
05:26 So maybe some of them, some of the tax related pieces may actually be announced earlier.
05:31 There's been a path to reduce the need for using exemptions.
05:39 And they have done that by creating a parallel income tax regime for individuals where you
05:44 don't claim any subsidies or other, you don't claim any exemptions and you get a different
05:50 taxation structure.
05:51 I expect that to be slightly tweaked.
05:53 But beyond that, I think a lot of the industrial measures will kind of be not even in the budgets.
06:01 They will probably be in an overall continuous sequence of things.
06:07 It's also difficult to predict what can come out from these governments' budget.
06:13 That's something that we've learned.
06:15 Mr. Bagga, great to have you on NDTV Profit.
06:18 Let's begin with your take on whether we will end up seeing some surprises.
06:25 Will we see a reduction in CapEx because there's a very clear fiscal glide path.
06:32 And if you do the math, then your government expenditure will have to get squeezed this
06:37 year and that is something which might not be too positive for a number of companies
06:42 and stocks that have run up on the back of huge government spends on infrastructure.
06:47 Yeah, absolutely, Tamanna.
06:50 It won't continue at the rate it was growing at.
06:54 So it will be a single digit growth rate.
06:57 But that is fine.
07:00 From 10 lakh crores, you will probably go to about a 12 lakh crore kind of number overall,
07:08 or maybe a little less than that.
07:11 So CapEx will remain a theme within that, be it defence, indigenisation and modernisation,
07:19 bringing defence in line with the learnings from the Ukraine-Russia war, the entire Agnibir
07:27 scheme or the way of making it a human light, but more automated military force and with
07:38 a combined network across the three fields so that there is a combined command which
07:47 can be brought to bear in case of a war.
07:52 I think those things are driving our defence modernisation.
07:56 That will continue.
07:57 So I'm expecting increased outlays on defence, on railways, on roads will continue.
08:05 So that should stay.
08:08 Not expecting a cut per se in the infrastructure number, but infrastructure CapEx number, but
08:16 the growth will definitely slow down.
08:20 That is one.
08:21 But taking it back to 30,000 feet, it might be used as an undeclared election manifesto.
08:32 The budget could point to a lot of things that will be done over the next 5, 10, 15
08:39 years and going right up to 2047.
08:42 I think that there is a chance to lay down that vision and the government will use that
08:49 chance well.
08:50 Deepak, let me start with you.
08:52 If I were to ask you, what are your big ideas?
08:56 I've put the number five, but even if you have fewer or more, that's OK.
09:00 What are your big ideas, your top themes, and how do they translate into the ability
09:05 to pick those ideas in the market?
09:08 Because PSUs already massive run up, rail stocks, massive run up already.
09:14 So where do those opportunities exist?
09:17 So I continue to think, of course, there's going to be a lot more of what they've already
09:22 done to carry that forward.
09:25 So I expect, number one, continued investment in defence indigenisation, in railways indigenisation.
09:33 So we're going to get a lot more, either the PSUs or the private players, getting a lot
09:37 more business from the railways in order to improve the mix, which was largely currently
09:45 buying stuff and then getting services also from companies abroad, which has now changed
09:51 to buying some stuff from companies abroad, but doing the majority of the work in India.
09:56 So I think a lot more projects are, I mean, and plus you've got a lot of stuff that's
10:01 still not finished.
10:02 You've got a dedicated freight corridor.
10:07 The DFC still continues to be in progress.
10:09 So I think that has to be continued and has gained its budgetary allocation as well.
10:16 Apart from that, you've got the defence programs, a lot more of the ships that have been ordered
10:22 and then their movement towards more indigenisation of technology on some of the air equipment
10:30 as well.
10:31 So I think all of this will continue.
10:33 So this is like business as usual, but in the sense of this was a process that started
10:38 about three or four years ago and that will continue.
10:41 I expect that the tax slabs will probably change to a higher degree for people who don't
10:47 take exemptions.
10:48 So currently it is, you know, India is in a weird situation where up to seven lakhs
10:53 if you earn, you pay zero tax.
10:56 But under the old regime, if you make more than 10 lakh rupees, you pay the highest tax
11:02 bracket there is.
11:03 I mean, roughly there's higher surcharges, but the tax bracket is the 30% plus bracket,
11:09 which happens at 10 lakhs.
11:10 So up to seven lakhs is free, 10 lakhs is the highest tax bracket.
11:13 You really have a very, you're really not doing the progressive tax system that we were
11:20 originally envisioned to be.
11:21 So I think what they're going to do and right now that particular number is higher for the
11:29 version of the tax system that takes no exemptions.
11:32 If you take no exemptions, then your 30% or highest bracket tax starts only at 15 lakhs.
11:39 Expect that to go up.
11:40 So we'll get some room over there.
11:42 The idea being take less exemptions, pay lesser tax overall, because unless you're really
11:47 high earner, then the tax, the exemption should not matter quite as much for you.
11:54 This is, I think in the overall scheme of things, more welcome, but it will cause some,
12:00 you know, during the process, there will be some issues in implementation.
12:04 I'm going to come back to you.
12:05 I need to take a break, Deepak.
12:08 I'm going to come back to you and to Mr. Bagga.
12:11 You know, it's some, we are going to be seeing some very fundamental shifts in policy.
12:20 Everything that you've mentioned so that people are safer for their retirement.
12:25 Let's even talk about the insurance push.
12:28 Insurance for all is a big government push.
12:29 What do we see there?
12:31 But when we come back after the break, let's get more specific and talk about actionable
12:35 insights for our viewers.
12:37 With all of this information, what do they do?
12:40 What are the sectors and companies that they need to keep on their radar?
12:44 We're coming back with that after this break.
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15:16 Welcome back to this pre-budget special.
15:22 We're talking about big ideas for budget and beyond.
15:25 Mr. Bagga, let me come to you now.
15:27 You talked about some of the themes, you know, including green energy, defense, etc.
15:33 What would be the top sectors that you think will benefit from these kind of spends beyond what they actually have?
15:41 And any companies that you have in mind?
15:44 You know, that's quite clear from how the market has been bidding up the railway stocks, the defense-related stocks.
15:55 Infrastructure has done quite well.
15:57 Banking has lagged because of reduced margins to some extent.
16:03 But I think banking and the entire financial pack will also be a participant in that.
16:10 And then auto.
16:11 As the rural economy picks up steam again this year, two-wheelers, tractors should see an uptick unless you get another bad monsoon,
16:24 in which case the government's hands will be full in terms of stimulating rural demand.
16:31 So those are very clear in the market and a lot of expectation is there.
16:37 In fact, there could be a bit of a sell-off if the allocations are lower in railways or defense vis-a-vis what is expected.
16:48 Or the overall CapEx number will be watched.
16:51 Last year was a big plus.
16:54 And I don't expect that kind of a growth, but we could still have growth and not a cut this year.
17:04 So let's wait and watch.
17:06 I think within those, what we were talking, we have to look at capital, which is the financials.
17:14 We have to look at CapEx, which is all these sectors, the infrastructure providers, construction companies,
17:21 who are putting up roads, bridges, ports, companies, transport, logistics, as well as defense and railways, modernization, indigenization play.
17:33 I think that's a multi-year play that's going on.
17:37 And finally, consumer.
17:38 The consumer has suffered because demand, both at the lower end of the pyramid in urban sphere as well as the rural demand, has not kept pace.
17:50 So we have a problem with aggregate demand.
17:53 But in a year where we are expecting rate cuts with the macro continuing at about an 11 to 12% in nominal terms,
18:03 we are expecting that there will be money going into these sectors.
18:08 There will be some redistribution as well as generating surpluses, and that will help.
18:14 And the other theme, Tamanna, this year we have to look at, I think finally seeing where the profit to GDP number overall is going,
18:25 the 11 lakh crore profit of the listed companies.
18:29 I think you have a chance now of CapEx breaking through that 3 lakh crore number.
18:36 So we are expecting more private CapEx to be announced later in the year, maybe June, July, once the budget comes in,
18:45 the new government has settled in, then you could see more CapEx catching up.
18:50 Because you spoke about the private CapEx cycle, that's a constant theme, that when will the private CapEx cycle come through?
18:57 And to be fair, a lot of the push we've seen right now is government CapEx and government spending.
19:05 On infrastructure, and you have seen that reflecting the markets as well.
19:09 Ajay, are you comfortable with your top four or five picks that are on your list, on your radar, ahead of the budget?
19:17 Particular stocks I can't talk, that's why I talk sectors.
19:21 Okay, but we have pretty clear indicators there. Deepak, let me come to you on specifics.
19:26 If you are going to have a focus on rural demand, do you think fertilizer companies are something that you will keep on your radar?
19:34 Health insurance, life insurance is a big push. Will healthcare be on your radar?
19:41 What are some of the key ideas that you think will really show some real growth or very concrete growth post the budget?
19:50 So, Tamanna, we actually have like a five-theme portfolio that we run in the PMS, and we call it Surge India.
19:57 It's specifically geared towards India itself. What's changing here?
20:02 I talked about a couple, I talked about how India is moving more towards indigenization, and we call this import substitution.
20:09 India doesn't need to be an exporter. It is already doing a PLI scheme, the idea of being produced in India.
20:16 And then you want to use it in India or sell it in India or sell it abroad, that's your wish.
20:20 But produce in India is what, or make in India is what they're talking about.
20:25 That's starting to, that's been moving the needle very, very slowly, but it's moved very well in the last one, one and a half years.
20:33 Part of defense and railways is that as well.
20:37 There's energy independence, the idea being reduce your dependence on crude oil.
20:41 And actually, if you reduce your dependence on crude oil by just 50%, that means you just import half the oil that you used to,
20:48 then you will actually have no current account deficit, which means our current account deficit is so specifically geared towards energy imports,
20:58 that we would actually have a current account surplus if we reduce energy imports to half.
21:03 And how do you do that? You talk about hydrogen, you talk about electric vehicles,
21:09 you build a lot more of that in-house, from materials to the batteries to some of the other stuff, semiconductors,
21:18 some of our greatest, biggest imports that needs to be starting to be at least processed beyond the core chips and all that stuff,
21:27 which will take time. You could do the rest of the stuff in India.
21:30 So, here is where we have a bunch of bets around both the semiconductor space and in the energy independence space.
21:40 There is also financialization, like you talked about insurance.
21:43 I think insurance is currently, it's a complex game.
21:48 So, it may be more health insurance driven where you need more legal power because currently there's a lot of fraud in health
21:56 and universal health coverage from an insurance perspective will suffer because rates are high because of levels of claims are very, very high
22:06 and many of them tend to be fraudulent and therefore companies are very vigilant.
22:11 So, we need a broader part of the ecosystem here, but I think this will move quite,
22:18 India is getting to be financial from an investment perspective, from an insurance perspective, also from credit perspective.
22:26 We're seeing a lot more in terms of retail loans, Arbay is worried, but I think some part of it is a good development.
22:32 Banks are meant to finance individuals. They're not being meant to finance corporates.
22:37 Corporates should be borrowing from the bond market.
22:39 So, hopefully that will be the thing going forward and we're actually building portfolio positions along that line as well.
22:47 Apart from this, if you look at in general the domestic consumption story, I think we've just begun.
22:55 From expensive, I mean the luxury items being unavailable in India to India becoming a relatively decent market for them.
23:04 I think there's a lot more in terms of domestic consumption that can drive it.
23:09 We don't have an India-wide dosa brand. We don't have an India-wide biryani brand.
23:13 It's strange because that's the most common order of things in the world.
23:18 I think, Deepak, that's also a reflection of different tastes across the country.
23:23 I mean, good luck to anyone who is trying to create one biryani chain for all states.
23:30 Having said that, any of your top companies or topics that you think will see that kind of an upside budget and beyond?
23:41 Not necessarily related to budget. Of course, we have a bunch of positions here.
23:46 So, maybe not useful to talk specifics because we're continuing to be buying a lot of these in the PMS.
23:52 But some of the publicly stated positions that we have are continuing to be in LIC,
23:56 but that's not more a growth angle right now from the perspective of the market because I think that will take two or three years.
24:03 The idea over there is there are some specifics about the company which is changing.
24:08 The change in it is so dramatic that it will grow profits substantially just because it is moving to a more mature format
24:19 and a more corporatized format rather than the corporation format that it was earlier, which was not shareholder driven.
24:27 So, that's one of the positions. But we also have positions in a bunch of defense stocks, a bunch of defense-related stocks.
24:34 I think domestic consumption is the theory there. The biggest selling car in India is no longer the small and Maruti.
24:42 It was the Tata Nexon for two or three months consecutively.
24:47 And you're seeing demand for SUVs like the Mahindra SUVs through the roof.
24:55 You're getting 18-month waiting periods and all that stuff for cars, for these cars, relatively expensive.
25:01 So, I think that's another part of the story which is long overdue in terms of seeing actual big growth in that area.
25:10 I'm not so focused on rural right now. I think it's going to be a one-year game for rural.
25:14 India's elections are India's Robin Hood. They transfer money from the rich cities to the poor villages in the form of vote collection and all that stuff.
25:25 So, you'll see a big push in the rural economy in the next year or so. But I don't expect that to last too long in terms of the bump up.
25:33 Then we'll go back to the normal growth rate there, which is 7-10% in general.
25:39 Okay. So, a lot of ideas and a lot of themes discussed here today that you should keep your focus on ahead of the budget and beyond.
25:47 Because like we said, this is an interim budget. It's setting the stage for the election that has to come.
25:53 So, a lot of cues there. Thank you so much, Mr. Bhaggan, Mr. Shannoy for joining us.
25:58 Pleasure as always. Great to hear your thoughts on NDTV Profit.
26:02 That's all the time we have in this special broadcast.
26:05 But for all our coverage running up to the budget and of course on Budget Day, don't forget to join us on our website, on our channel and on all our social media platforms.
26:15 Thank you for watching.
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