Budget 2024: Infra, defence, railways could be in focus; market to be rangebound, says Arpit Jain of Arihant Capital

Arpit Jain, Joint Managing Director at Arihant Capital Markets expects the government to keep infrastructure, defence, and railways in focus in the Interim Budget 2024. In an interview with Mint, Jain said various sectors have already experienced expectations-driven rallies, but there are significant opportunities in the infrastructure and capital routes sectors. Jain also shares his views on the markets and expectations on interest rates trajectory. Edited excerpts:

What are the key monitorables in the Interim Budget 2024? What will be the key focus area of investors in this Budget? What sectors are likely to get a boost from the Budget?

In anticipation of the Interim Budget 2024, our focus lies on potential enhancements in infrastructure, defence, and railways allocations. 

Investors are strategically eyeing emerging sectors, including energy and education, post-elections for notable growth opportunities. 

While navigating the Budget period, caution is advised, considering potential market volatility. 

Our recommendation for long-term investors is to await the Budget announcement, seizing opportunities thereafter for well-informed investment decisions. 

Also Read: Budget 2024: These are the 6 key Budget promises delivered in recent past

The current focus is crucial since it is an Interim Budget. It is likely to provide an outline of anticipated developments after the upcoming 2024 election. 

While various sectors have already experienced expectations-driven rallies, we see significant opportunities in the infrastructure and capital routes sectors. Additionally, divestment within PSUs may unfold post the Budget announcement. 

Also Read: Budget 2024: Govt may announce sops for the middle class, rural segments: Rupen Rajguru of Julius Baer India

Given the present Interim Budget scenario, attention should be directed towards these aspects, with a particular emphasis on housing finance or real estate, where potential announcements may occur. These four areas require careful consideration.

Read our entire Budget coverage here

The domestic market has seen strong volatility in January. What is your short-term view of the market?

We are expecting the market to maintain a choppy or rangebound trajectory, possibly with a slight negative bias even post the Budget, we must exercise caution and selectivity in our investment approach. 

Following this rally, it becomes imperative to incorporate a margin of safety in the stocks we choose to invest in. 

Agri-chem stands out as a sector worth considering, particularly within the agricultural or rural theme.

Also Read: Investors should reexamine their perceptions during the bull run. This is how

Rate cut hopes are fizzling out. Do you think a shallow rate cut may disappoint the market?

Hopes for a rate cut are diminishing, and it is not accurate to attribute this to a mere delay due to recent inflation concerns.

Despite a potential shallow rate cut that might disappoint the market, historical trends indicate that market expectations have consistently anticipated a rate cut. 

This could particularly benefit financial sectors and boost consumption, especially in areas like consumer durables, with the potential to drive certain sectors forward.

Some apprehensions are there that the US may slip into recession this year. What are your thoughts? Can it deal a strong blow to the domestic market?

There is a significant likelihood of a slowdown in the US, and it is quite plausible.

If we witness an economic slowdown when the rate-cut cycle concludes, it could potentially deal a major blow to the domestic market. 

However, it is worth noting that the Indian domestic market, in the short term, remains relatively isolated from global markets.

We see a strong influx of retail investors in the domestic market. Do you think their response to the market volatility is a risk as it can trigger a panic selloff?

The current breed of retail investors in the market is notably more informed compared to its predecessor. 

While certain pockets, particularly in the SME segment, have experienced a sense of euphoria among retail investors, there might be a minor sell-off in the market. This, however, could be beneficial for the market in the long run.

How do you see the Q3 earnings of Indian firms so far? What sectors could see an upgrade/downgrade?

The recent updates present a mixed picture. While the IT sector's financial figures were not particularly impressive, the accompanying commentary surpassed market expectations. 

Managers, however, express some disappointment with high approvals and pressure on NIM (net interest margin), signalling a renewal. 

Also Read: IT, pharma indices outperform Nifty 50 in last 6 months; can the trend continue? Here's what experts say

The FMCG sector faced weakness, but there are indications of improvement, with expectations of addressing technical issues. 

In Q4, global economic conditions need monitoring, especially in infrastructure and capital sectors where strong earnings are anticipated. Overall, various places have reported decent financial results.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.