Sunday, January 15, 2023

Welcome to The Weekly, where our team shares a few thoughts to take you into the week. This week’s thoughts have been brought to you by Sagar Lele, Founder of Rupeeting. He also manages the All-Weather portfolios.

Betting on the Budget

The upcoming budget is a crucial one for two reasons. First, the budget needs to have elements that continue keeping India at the top of the global growth chart. And second, the government needs to please people as this is the last full-year budget before General Elections in 2024

There’s one factor that can ensure the satisfactory achievement of both these objectives - CAPEX! Here’s why:

1. As a policy decision, the infrastructure push has worked from a growth and public validation standpoint
2. Tangible progress on infrastructure is a key focus for any government in the last two years of an election cycle
3. With monetary policy being regressive, and successful at stemming inflation, India needs fiscal support to continue standing out on the global growth stage
4. With inflation showing signs of having peaked, subsidy bills are likely to come down next year, providing some fiscal room, and
5. Intended global supply chain reorganisation provides a strategic opportunity for policy to capitalise on

If we take a calculated bet on aggressive CAPEX in this budget, there are several opportunities that emerge in the markets. Some of them include:

• Infrastructure push - Cement, construction, defence, engineering, infrastructure, and rail
• PLI focus - Auto components, chemicals, electrical goods, and industrial components
• Mid and small stocks - Manufacturing companies embarking on aggressive CAPEX to cater to domestic and export demand

By, the way, we wrote a feature presenting our views on the budget and its impact on the markets for Business Today!

Budget 2023: Need of the hour is a bold bet on capex