Analyst Notes: (04/02/2021)
This is a thematic portfolio of Budget beneficiaires. These companies may or may not be part of our coverage/process. We will recommend two good companies from this list separately for long term buy as per our process.
Bulk of your portfolio 60-70% must be in Core stocks and 30-40% in Booster and Thematic (High Risk). We recommend cautious approach in thematic portfolio as it may or may not deliver expected outcome of consistent returns versus Core portfolio. At the same time, it can generate exponential returns when it delivers.
We recommend to invest in adjoining basket of companies in a Staggered manner. They might have run up post-budget but they will cool off ~10-15% over time.
We are publishing this report in Theme Investing Format so that you will be able to execute buy orders on regular basis (Over next 2-3 quarters). Do not exceed 10% of portfolio in each theme. You can de-select companies if you already own it.
(More info on individual companies will published in a week)
Budget 2021-22: Budget like never before in last 6 years
Every crisis forces the government’s hand to put the economy back on its feet. This year’s budget following the pandemic crisis was nothing short of it.
On February 1st 2021, Hon. Finance Minister Nirmala Sitharaman presented Budget 2021-22. On the face of it, nothing negative (on taxation) was good news for the stock market.
The commitment of the government to revive the economy is seen by budgeted estimate of 6.8% fiscal deficit in FY22. This follows 9.5% fiscal deficit seen for the year FY21. It could have been worse if the government were to increase taxes and to keep a check on fiscal deficit.
Not just that, the glide path for fiscal deficit also indicates strong expansionary policy for few years, with fiscal deficit going below 4.5% only in FY26. This was a pleasant surprise for the markets with Nifty closing 4.75% higher for the day.
The NK Singh committee - constituted by the Narendra Modi government - recommended a fiscal glide path for the government that would have gradually brought down the fiscal deficit to 3 percent of GDP by the end of FY20 and further reduced it 2.5 percent by FY23.Now with Covid slowdown hitting the country, the government changed its stance to grow the economy through investments.
Key numbers from the budget speech:
Category wise budget announcements (For investors):
Textiles and Manufacturing:
In a nutshell, it was an opportunistic budget to kick start economic cycle at a time when even global economies are running large deficits. Bond investors may get more cautious looking at increasing glide path for fiscal deficit but it certainly is one leg up for equity markets in long term.
What are some big ideas for next 5 years?
Over next 5 years, we believe that the focus of the market will shift to sectors like Manufacturing (Domestic and Exports), Infrastructure and Capital Goods. We had anticipated it in the year FY19-20, but looks like it’s coming true now, better late than never.
Themes: Consumption | Digital India | Arogya India | Budget 2021-22 | Currency Sensitive | Financialization | Grameen Bharat | Growth | Infrastructure | Leisure India | Transportation and Logistics