Budget 2024: Some tinkering with standard deduction may happen, says Trupti Agrawal of WhiteOak Capital

Stock market’s direction in the short term is similar to the flip of a coin. So, it is advisable to spot opportunities in great businesses at good valuations, says Trupti Agrawal, Fund Manager, WhiteOak Capital AMC, in an email interview with MintGenie.

She also shares her views on the expectations from Budget 2024. With regards to the  interim Budget 2024, she believes that the government's allocation is expected to increase in railways, roadways and housing.

Investing in India, she believes, remains as compelling as ever. In view of the prevailing positive sentiment in financial services and pharma & healthcare, WhiteOak AMC has launched a scheme in each of these categories.

She also asserts that largecaps – as a segment – have become more attractive. 

Edited Excerpts:

Stock prices are believed to be overpriced; what advice do you have for investors? Should they stay invested or go for some profit booking?

Taking an investment decision based on near-term valuations/market levels amounts to market timing. Our fundamental, long-held belief has been that in the short term, the direction of equity markets is impossible to predict, hardly any different than a coin flip. 

The most exciting part about the Indian market is the potential to generate alpha and thus the opportunity cost of market timing is also very high. Thus, from a prudent risk management perspective, we continue to stay fully invested at all times with a bottom-up approach to investing in great businesses at attractive valuations. 

This does not imply a passive buy and hold approach but an active assessment of opportunities. Irrespective of market levels, at every point in time there will be companies which will be relatively undervalued, and our portfolio will reflect some of these new ideas, if they meet our framework of great business.

The interim Budget 2024 is around the corner. What are your expectations from it relating to the proposed exemptions and major changes in tax rates, etc.? 

Traditionally, interim budgets do not have major tax related reforms/ announcements.  Thus, any major change is unlikely although one can expect some tinkering with standard deduction or exemption limits in order to incentivise taxpayers into joining the new tax regime. 

How is the broader market expected to behave in this year? Do your expect some correction to happen soon after the budget or post elections?

We continue to live in an environment characterised by unfavourable inflation dynamics at a global scale, slowing Chinese economy, persistently high geo-political risks, and an aftermath of the pandemic in many ways. India appears to be better placed, on a relative basis due a favourable macroeconomic environment, stable political regime and the resilience demonstrated by the economy during the stress test of the Covid crisis, and hence a faster rebound thereafter. The fundamental case for investing in India remains as compelling as ever if not stronger.

We have always believed that in the very near term, the market movement is impossible to predict. Apart from the budget, there are many global and domestic events, including the ongoing corporate earnings season which will have an impact on the markets.

As far as the general elections 2024 are concerned, most investors will view recent state election outcomes positively in anticipation of reduced policy and political risks into 2024.

Can you tell us about the sectors/themes that are likely to do well this year? Has WhiteOak launched any sectoral mutual funds to capitalise on the positive sentiment in these sectors? 

India is benefitting from several secular tailwinds. A potential multi-decade growth opportunity is unfolding as per capita incomes rise, creating inflection points for various categories where India is at the lower end of the consumption curve. 

Additionally, the country is experiencing rapid digitalisation and formalisation on the back of massive investments and crucial and ongoing structural reforms. 

There are a host of sectors which will stand to benefit from the above tailwinds. Leveraging the expertise of our well-resourced and experienced investment team we have recently launched two new funds to provide our investors an opportunity to invest in two of the key multi-year growth themes in the Indian equity markets - ‘WhiteOak Capital Banking & Financial Services Fund’ and ‘WhiteOak Capital Pharma and Healthcare Fund’.  

What are your views on the sectors that are likely to get an impetus in the interim budget?

The last few budgets have laid the stress on sustainable growth while signalling policy continuity with a thrust on public capex, enhancing the ease of doing business and boosting exports and manufacturing. This interim budget is unlikely to alter that direction. When it comes to capex, government’s push for infrastructure could see railway & roadways receiving a healthy allocation. Similarly, housing sector may receive a boost. 

What are your views on the high valuation of small and mid-cap stocks? Should retail investors stay away from them for the time being? 

Although it is impossible to forecast the near-term relative performance of market segments, given the strong returns that SMIDs have generated in 2023, largecaps as a segment have become relatively more attractive from a valuation stand-point. It is also true that some pockets of mid and small-caps may look overstretched as far as valuations are concerned and will appear attractive if the anticipated economic growth in India comes through. 

It is fair to stay fully invested, but expectation going forward should be low double-digit return.