Budget 2021: Growth Focus Will Take Care Of Problems, Say Nilesh Shah And Hiren Ved
Budget 2021 is not about this and next year’s fiscal deficit but the growth push, which is expected to drive India's equity markets, according to two market veterans.
The government has used the first such opportunity after the Covid-19 pandemic to start growing the pie, even if it comes at the cost of the fiscal deficit, Hiren Ved, director and chief executive officer of Alchemy Capital, told BloombergQuint’s Niraj Shah in an interaction. If “right steps” are taken on divestment, privatisation and other measures, growth will be so good that the deficit glide path will better than what the government has laid out, he said.
"The philosophy in this budget is more important than the numbers in the budget," he said, adding that growth in a country like India solves a lot of problems.
According to Nilesh Shah, managing director of Kotak Mahindra Asset Management Co., the equity markets will take this budget very positively. Growth possibilities laid out by the budget and subsequent actions by the government will help increase the risk appetite, both Shah and Ved said.
Global capital, according to Ved, will follow opportunity for growth and clear policy, which this budget has shown. “And if India continues on the policy philosophy, then despite valuations, money will come in, which will help the equity markets,” he said.
Shah said while valuations may not rerate from the current levels, and with the earnings growth likely to follow, valuations will look sober once the earnings shoot up. “This quarter, 102 companies profit growth was expected to be 14% and it has come in at 32%. Analysts have no options but to upgrade their earnings going ahead.”
Both agreed the budget has opened the doors for both public and private investment—from both global and local investors. Ved cited George Soros’ theory of reflexivity, saying with the markets doing so well, it has opened up avenues for companies to raise capital and invest, inviting a higher growth trajectory, with the economy then following the markets. The fact that India is talking about privatising public-sector banks, and adding a slew of targets for privatisation this year adds to the positive sentiment, he said.