Rural consumption could be in focus; be cautious of valuation mismatch in PSUs: Kshitiz Mahajan on Union Budget 2024

economictimes.indiatimes.com:

Union Budget.

Excerpts:

Q: Let's start with how Sensex and Nifty have performed in the last month. Historically, the market tends to stay flat one week before the budget. Post-budget, Nifty has averaged a return of around 5.7% in the month following the budget over the last decade. What are your thoughts on this growth and what do you expect from the markets?

Kshitiz Mahajan:

This is a unique budget. The initial expectation was a clear mandate, but it seems like a coalition is forming the government. This shift may result in a budget more focused on rural and consumption-driven growth. I anticipate significant sops for the farm sector and growth drivers for rural areas. The government will likely continue pushing the manufacturing sector. Markets are reacting differently post-election results, but we need to be cautious about valuation mismatches that could strain the rally. I expect a middle-class and rural-focused budget, with no significant changes in taxes, though there might be some tax advantages for deposits. On the equity side, I'm expecting a status quo.

Q: Moving on to valuations and specific sectors, which sectors do you think will be in focus pre- and post-budget, and why?

Kshitiz Mahajan:

Consumption, particularly rural consumption, will be a core focus. Plotting the value chain, we see companies benefiting from rural consumption, including those in housing and pure consumption plays like ITC and Emami. These aren't recommendations but examples. The banking sector, lagging behind Nifty for the past