Would rate this budget an 8 out of 10, says Kunal Ambasta of Liquide; suggests investing more in largecaps

Kunal Ambasta, Co- founder and Chief Investment Officer at Liquide, has rated the Budget 2024 an ‘8 out of 10’. In an interview, Ambasta stated that contrary to expectations of it being a populist one, the Modi government has remained steadfast in its vision of shaping a 'Viksit Bharat' by 2047. He expects markets might experience either a time correction or a price correction on the back of rise in capital gains taxes and suggests investors to lean towards large-cap stocks. 

Edited excerpts:

How will you rate the FY25 Union Budget?

Well, contrary to expectations of it being a populist one, the Modi government has remained steadfast in its vision of shaping a 'Viksit Bharat' by 2047. This budget really pushes the envelope with its nine transformative priorities, aiming to spur growth across a broad spectrum of sectors. It's quite comprehensive, addressing critical areas necessary to evolve India into a self-reliant economy. From bolstering the rural economy and supporting farmers to empowering women and creating employment opportunities, it seems they’ve covered all bases, including upskilling the youth. Overall, I would rate this budget an 8 out of 10.

Capital gain tax hike was a big surprise. will this lead to a strong correction in the near term?

While we're unlikely to see a full-blown stock market crash, adjustments are definitely on the horizon. The market might experience either a time correction or a price correction. The short-term capital gain tax was anticipated, but the jump to 12.5% for long-term gains caught everyone off guard. We're all waiting to see how foreign institutional investors will respond.

How will the rise in STT impact F&O Trading?

The increase in STT is primarily aimed at curtailing speculative trading. Despite this, many of the newer traders are quite adapted to these conditions, so it might not deter them significantly. However, algorithmic trades could take a hit since they operate on thin margins and frequent transactions, and the higher charges might make some strategies less viable.

What is your year-end target for Nifty?

Nifty seems poised for a cooling-off period, perhaps entering a phase of time or price correction. I'm not expecting substantial growth in the near term—may be a 4-5% increase at most by the end of this calendar year.

What worked and what didn’t in this budget?

This budget hit the mark in several areas, but the tax clauses were a bit of a letdown. They could have a dampening effect on investor sentiment and market dynamics.

What should be the market strategy now that the budget is over?

The Indian market was somewhat isolated, charting its own course independent of global events. Moving forward, I expect it to start realigning with the global markets. My advice would be to focus on quality stocks and lean towards investments in largecaps for the long haul.

Midcaps and smallcaps tanked on budget day? How will they fare going ahead?

Mid-cap and small-cap stocks have always carried high return expectations. After such a jolt, we might see some profit-booking and slower growth in these segments for a while.

What other trends will the market focus on from now onwards?

As we move forward, we should keep an eye on global economic indicators, particularly the U.S. elections, which could introduce volatility depending on the outcomes and policies proposed. Any signals regarding rate cuts will be pivotal, as they typically influence investor sentiment and economic activity. On the domestic front, the overarching theme of consumption will also play a critical role, especially how consumer behaviour adjusts post budget.

Post the budget, which sectors would you recommend, and which would you stay away from?

In the aftermath of the budget, certain sectors emerge as particularly promising. The FMCG sector is likely to benefit from increased consumer spending and stability. Banking and IT sectors are also looking robust, with potential growth driven by technological advancements and financial inclusivity initiatives. Focus less on avoiding sectors as a whole and more on steering clear of stocks with overstretched valuations, where the prices are high relative to their earnings potential.

One piece of advice for new investors?

Keep up with your Systematic Investment Plans (SIPs). It’s a tried and tested method to build wealth over time, especially in volatile markets.

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