- How will markets react to #Budget2024?
- What is Dalal Street anticipating?
Samina Nalwala, Niraj Shah and Tamanna Inamdar speak to experts on 'Budget 2024: The Take-Off'. #NDTVProfitLive
- What is Dalal Street anticipating?
Samina Nalwala, Niraj Shah and Tamanna Inamdar speak to experts on 'Budget 2024: The Take-Off'. #NDTVProfitLive
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TVTranscript
00:00 The takeoff, because it is indeed in our minds a takeoff, never mind the fact that people
00:07 are working with this being an interim budget.
00:08 Hello and welcome to this special conversation with me, Neeraj Sharma, my colleague, Tamanna
00:12 Inamdar.
00:13 We are trying to piece this together into two halves, which is try and talk about how
00:16 fixed income markets will approach whatever decisions are taken in the budget, and then
00:21 how will the equity markets take off as well.
00:24 And two very special guests, Tamanna, coming in on this.
00:26 Absolutely.
00:27 So this has been sort of, I would say, seen as a vote on account, not a very high impact
00:34 budget, but that would be perhaps foolhardy for a couple of reasons.
00:39 Look at 2019, where you had a vote on account which read pretty much like a full budget
00:45 and lo and behold, when the NDA came into power for the second time round a couple of
00:51 months later and presented its first post-election budget in July, it was pretty much the same
00:57 budget with a few additions and tinkering there.
00:59 You've already seen ahead of the budget an announcement on import duty cuts and mobile
01:04 components.
01:05 So the budget will now become an opportunity to lay down a statement vision.
01:11 One of the important factors though, will this government stick to its path of fiscal
01:15 consolidation?
01:16 And here's where we bring in our Sivakumar of Axis Mutual Fund, first up on the show.
01:21 Sivakumar, great to speak with you.
01:23 Thank you for joining us this morning on NDTV Profit.
01:26 And let's begin with that base question.
01:29 I would say that not just this government, but governments over the world had a free
01:33 pass of sorts for the last couple of years.
01:38 You were recovering post COVID, fiscal deficit wasn't such a big fat red line that you had
01:45 to adhere to.
01:46 That has changed now, right?
01:48 This is the budget where you look very closely at the numbers and see if we are truly on
01:53 the way to a trajectory of a 4.6% fiscal deficit by FY26.
01:58 Would you agree with that?
01:59 Good morning, first of all.
02:01 Yes, short answer.
02:02 The long answer is that, yeah, you know, we need to, the context matters a lot in these
02:08 kinds of discussions.
02:09 So you're absolutely right, post COVID, there was a significant relaxation of fiscal policies
02:16 across the world as governments try to support their respective economies.
02:21 And over the last few years, obviously that need to support the economy has decreased,
02:26 but more importantly, the need to rein in the fiscal to contain inflation has also mattered
02:33 a lot.
02:34 In many countries, you have seen inflation remaining so unsustainably high.
02:39 And one contributor to that has been the high fiscal deficit.
02:43 So I think both from a macroeconomic perspective on inflation, as well as from a broad support,
02:49 we would think that there is a need to consolidate the budget.
02:55 Just a quick question, Siva, on the morning of 1st Feb, are you going to be more keen
03:01 on what Jerome Powell is saying or what Nirmala Sitharaman is saying?
03:05 Both are going to be extremely important.
03:08 I think if you look at the budget, and especially from a macro perspective, the single number
03:14 which matters is the fiscal deficit.
03:15 And there's broad agreement that the government will follow the path towards consolidation.
03:19 So unless there is this extraordinary surprise that the government throws at us in terms
03:24 of changing the trajectory of the fiscal policy, from a fixed income rates markets perspective,
03:30 this budget should be relatively non-event.
03:32 I think, yes, it's possible that some small policy changes could be announced, which makes
03:37 some kind of an impact.
03:40 The Fed's decision and then the RBI next week, I think they're going to be even more important
03:45 from setting the tone of rates for us over the next year.
03:50 So I think we will be paying a lot of attention to the Fed as much as to the budget.
03:56 Siva, good morning, Neeraj here.
03:59 Would a number which is northwards of 5.5% for FY25 disappoint you or would you take
04:04 it in your stride?
04:06 I think if it's above 5.5%, it will certainly be a disappointment.
04:09 I think the government has been talking about sticking to this trajectory that they want
04:13 to bring the deficit down to 4.5% by FY26, which would still be significantly higher
04:19 than the pre-COVID trajectory.
04:21 So to bring fiscal deficit onto a sustainable path, we need to see some significant consolidation.
04:27 Now, 5.3, 5.4, I think somewhere there is where the market will be happy with.
04:32 And I think that will largely be achieved if they maintain the nominal fiscal deficit
04:36 at the same number, simply because the GDP expands by about 10%.
04:40 So if you keep it at the same number, then 5.9, 5.6, sorry, 5.9 to 6 would become closer
04:48 to 5.3, 5.4 next year.
04:50 So I think that's the expectation that we are all going.
04:53 Siva, the other aspect is the borrowing number.
04:57 And the belief is that currently the market is working with a number of about 15.2 trillion
05:04 for FY25.
05:05 Now, my question is, if the number is lower than that, and will be, of course, the whole
05:11 math will be important.
05:12 But if the number is lower than that, and other things remaining constant, would this
05:16 be positive for bond markets?
05:18 Or do you think that is kind of baked in?
05:23 I think the exact number depends on two items, right?
05:27 One is how much the net market borrowing is and how much is refinancing, which is repayments
05:33 of maturities.
05:34 Now, repayment maturities can happen in two ways.
05:36 I mean, one is that if, for example, if the government decides to do some kind of additional
05:41 switches before the end of this financial year, then the next financial year supply
05:44 goes down.
05:45 So you have to look at it from the perspective that if they have other ways of managing the
05:49 gross market borrowing number from one year to the next.
05:53 So we will wait and see what is the actual fiscal deficit and what will be there for
05:58 the market borrowing, how much of it is on account of switches, etc.
06:02 Before I can comment on that.
06:03 I think if the market is basically working with a 14-15 lakh crore kind of borrowing
06:10 program, and if this sticks in that ballpark, then it will be acceptable.
06:16 You know, it's an unenviable task, Siva, that the finance minister has this time.
06:21 She has to stick to the fiscal deficit glide path.
06:23 There are people like you watching that very closely.
06:26 And you are in a pre-election year.
06:29 The government has to keep up spending and capex.
06:33 The consensus seems to be that capex will be significantly lower this year.
06:38 How do you see that playing out?
06:40 Is that a concern or is that something that you would expect?
06:44 Yeah, on the other hand, I would think that they have the headroom.
06:49 This year, taxes have been very buoyant and there's good reason to expect that taxes can
06:53 remain buoyant next year.
06:55 And therefore, this kind of reduces that pressure to cut expenditures, which typically happen
07:00 towards the end of every financial year.
07:02 And I think if that buoyancy continues into next year, they have the ability to continue
07:05 the policy of capex.
07:06 Because remember, at the end of the day, that the government capex is contributing to growth
07:10 and in government revenue in comparison to government revenue expenditure.
07:14 So I think if the government continues on its path of increasing capex in relation to
07:17 revenue expenditure, that will be welcomed by all of us.
07:21 But to some extent, that is crowding in of capital expenditure, which is to say that
07:29 the more the government spends on things like infrastructure and government capex, that
07:32 tends to bring in private sector capex in similar regions.
07:35 So I think from a medium-term growth trajectory perspective, definitely the focus on capex
07:40 is well worth it.
07:41 I think the issue is, of course, is that what will they need to cut if they need to make
07:46 a cutting decision?
07:47 And like I said, because if tax buoyancy is there, they may not need to cut anything else
07:52 to continue the support for capex.
07:54 So where do you sort of tighten the purse strings?
07:57 Tax buoyancy is there, but the disinvestment plan hasn't really fired up, and that could
08:02 be a concern.
08:03 Just one point of actionable sort of insights, Sivabh, for people watching this and wondering
08:08 what to do with their portfolios on the fixed income side ahead of budget and on budget
08:13 morning, what would be your advice?
08:16 Let's first of all hope that there are no special surprises like we saw last year with
08:22 changes in the tax laws.
08:23 Assuming that this is a little bit more of a continuity, hopefully this will be a lot
08:29 less impactful than we saw last year.
08:33 And so in that sense, from a personal finance perspective, this shouldn't change the way
08:37 we behave.
08:38 Remember, at the end of the day, the volatility that market creates around an event typically
08:45 lasts for a day, maybe a couple of days at max, irrespective of which asset class you
08:49 look at.
08:50 But when you're making a portfolio investment decision, then you're making a decision for
08:52 the next several years to come.
08:54 So we should be a little bit wary of making large scale changes to our portfolio just
08:58 because of an event which has happened, whether that be the Fed, whether that be the RBI,
09:02 or whether that is the union fiscal statement.
09:05 So I think from a personal finance perspective, even if there is significant volatility, I
09:11 think we should not be too much of a turge.
09:15 Take a day, figure out what impact it has, and then make a call rather than trying to
09:19 make a call in rushed means.
09:21 We also have time.
09:22 I think from here to the end of the international year, even if there are any new changes to
09:26 come in next year, why not make those changes to the portfolio in a measured way over the
09:30 next couple of months rather than all at once tomorrow.
09:33 Okay, Siva, we'll leave it at that.
09:36 Thank you so much for taking the time out and being with us and giving us your thoughts.
09:38 Really appreciate your time.
09:39 Thank you.
09:40 All right.
09:41 That's the view on the fixed income side and what the bond markets could do.
09:45 We slip into a break and on the other side of the break, we have some view of Asked Hedge
09:49 Solutions Johnson to talk about what the equity side could expect from the budget.
09:53 Lots I must add, but let's hear out him on the other side.
09:56 Thanks for having me.
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12:52 Welcome back.
12:53 You're watching Budget The Takeoff.
12:54 This is our special pre-budget setup for you and now we're joined by Vaibhav Sanghvi of
12:59 Asked Hedge Solutions, ASK Hedge Solutions.
13:02 Vaibhav, very good morning.
13:03 Great to have you on the show and on NDTV Profit.
13:06 You know, let's begin with you settling this debate.
13:09 Is this a non-event or a big event?
13:12 How much do you think it matters what happens tomorrow and what Finance Minister presents
13:18 actually for a record six times?
13:20 Yeah, of course.
13:24 I think, you know, first of all, thank you for having me on the show and two, from a
13:28 vote on account budget, right?
13:30 I mean, I think with this government, what we've understood and realized is as against
13:36 the earlier dispensation, you can never kind of discard it in the sense that last time
13:42 around in 2019, we had a few important changes which have been made on the vote on account
13:49 budget as well.
13:50 So, my sense is or my guess is basically, I think this is going to be important.
13:56 One, in terms of continuation of the direction of what they have already been doing in the
14:03 last five years and whether, you know, that is going forward likely as well.
14:08 If that is the case, then, you know, there are broader directions where the budget is
14:14 likely to go in terms of better supply or better emphasis on supply side.
14:20 At the same time, trying to support the poor and the needy, which is kind of essential
14:26 and kind of tries to balance in terms of the, you know, overall population, you know, from
14:34 a nation perspective.
14:35 So, I think it's critical to understand and see the direction where is it heading post
14:41 tomorrow.
14:42 Vaibhav, good morning.
14:44 Neeraj here.
14:45 So, the street is littered with expectations from around four or five themes that could
14:51 probably be the key ones.
14:53 I want to start off by thinking of or asking you to tell us what do you think of the green
14:58 energy, renewables story out there and with a budget impetus, could there be more in store
15:05 for the longer term?
15:06 I think we've been, you know, hearing about, you know, flame three and various other measures
15:13 to kind of increase the, you know, incentives on the overall, you know, green theme.
15:21 Now, we also have to understand that this is in line with, you know, our very long-term
15:27 ambition of 2017 by being net zero.
15:30 At the same time, the COP28 summit, which, you know, kind of happened and the resolutions
15:36 which were passed on, I think we would have, along with us, the, you know, global other
15:42 countries as well would have those targets to be kind of completed as well.
15:46 To try and push, incentivize the industry's consumers, I think a huge amount of emphasis
15:53 is likely to come about, you know, on this space.
15:57 And we recently saw, you know, the Honorable Prime Minister also talking about rooftop,
16:03 you know, kind of solar panels as well.
16:06 So, I think a lot of activity, a lot of news, a lot of incentives and push from the government
16:12 is likely to be happening in this space where we are very bullish for the next few decades.
16:20 Okay.
16:23 The other aspect is this whole belief around CAPEX moderation.
16:26 Now, even if it's 10% and not 30% growth, but that's still a large number, assuming
16:30 that they do about 9 lakh crores or they get 10 lakh crores with a 10% growth.
16:34 Is that a good number for the CAPEX theme to continue performing on the bourses?
16:40 Of course, I think it is an absolute number versus a relative number, right?
16:44 As a percentage of your, you know, budget or probably, you know, on an absolute sense
16:49 where you are kind of, you know, going higher.
16:51 My sense is basically that on one side, when we are actually looking at good revenue traction
16:58 in terms of the tax buoyancy, I think the CAPEX theme will continue.
17:04 One thing we found from this, you know, government is the consistency in terms of their approach
17:10 towards the economy, pump priming the economy or, you know, or pushing for growth in this economy.
17:16 I think they are very focused on the supply side and my sense is basically I don't think
17:21 that is going away.
17:23 Of course, tomorrow and more likely so, you know, post the election when the main budget
17:28 comes, we'll probably see that.
17:31 Our sense is basically this will continue, both in absolute sense and relative sense
17:36 and the percentage of the budget as well.
17:38 You know, Weber, the conundrum right now is that the big themes and like you said, consistency
17:43 has been seen in terms of policy direction.
17:45 The big themes have all played out.
17:48 Railways, you've had phenomenal run up in, you know, the key counters.
17:53 You've seen that in green energy that you talked about, infra, defence, one of those.
17:59 So where do the opportunities in your view lie and, you know, what are the key areas
18:04 that you'll be watching out for?
18:07 See, I think the way, as you rightly mentioned, you know, have played out a bit a little,
18:12 but I would rather see the other way where I would think that they probably just started
18:18 in the sense that being these opportunities, a very long term opportunity.
18:23 So for something like a climate, green energy, it's not about one year or two years.
18:28 Right.
18:29 I think it is about a multi-decade kind of opportunity.
18:31 Similarly, in case of defence, what we are seeing that the policy actions, you know,
18:36 right from PLIs to Make in India, I think that's those are structural policies.
18:42 And those policies, in my view, will take the industry.
18:46 It's not, again, about one and two years, but a very good progress path over multi-years
18:53 or probably a decade or so.
18:55 So I think we should not be kind of be myopic about this and probably look for extremely
19:02 short term.
19:03 OK, of course, these themes are played a bit, but I think there is a long way to go as well
19:08 when we want to kind of capture the opportunity.
19:11 So, yes, of course, in the interim, you may see some more corrections, but I think we
19:18 should be stuck to playing this long term opportunity.
19:21 Yeah, in terms of, I get your point about a long term opportunity, but some of the valuations
19:27 are truly starting to pinch.
19:29 So, you know, your view on that and also something specific on what you expect on budget day.
19:34 We were looking through data of how markets generally perform on budget day and most of
19:39 the action happens post, I suppose, once the fine print is digested.
19:43 You see on the fence sort of range bound play on the budget day.
19:48 Are you expecting to see that once again?
19:51 I think one first to address your question in terms of valuations, I think, of course,
19:56 you're right.
19:57 I think the valuations have re-dated on the higher side and we will have to see that how
20:03 the swelling of your order books are translating into better revenue traction and increasing
20:09 margins.
20:10 If that is the case, the valuations will remain high.
20:13 I don't think that is much of a problem, at least in the medium term.
20:18 Coming to the question in terms of your budget day, of course, during the time of the budget,
20:23 you will see some amount of volatility coming about, but unless there is a big surprise
20:29 either way, my sense is basically the markets will probably end range bound.
20:33 I don't think there would be any major excitement or probably any euphoria should there not
20:42 be any kind of surprise in terms of the announcement.
20:45 Now, surprise in the announcement, of course, will come from the fine print reading and
20:50 analysis.
20:51 So, next day is one where you may see larger action coming about.
20:56 Vaibhav Sanghvi of ASK says the fine print is where everything will matter and you'll
21:02 see that next day.
21:03 Now, let's cut across to Prime Minister Modi's addressing the media ahead of the budget session.
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