Government Likely To Spend More On Income Support Schemes, Says Edelweiss’ Aditya Narain

The re-elected Modi government is likely to increase spending on the income support schemes for farmers and the poor rather than infrastructure, according to Aditya Narain, head of research for Institutional Equities at Edelweiss Securities.

“The Prime Minister Narendra Modi-led government might employ a lot of fiscal stimulus in the income support programs, the multiplier effect of which is good,” Narain told BloombergQuint in an interview. “More money in the hands of individuals would support low-end consumption.” Narain expects better opportunities in the staple space.

The economic slowdown witnessed in India in the past few months is more than just a dip, he said. “We require reasonably aggressive policy support to get it out, and we need to have that come in early, rather than waiting for the entire cycle to play through.”

Banks

Edelweiss Securities is bullish on the banking industry, especially corporate banks, Narain said. “Corporate banks have the best mix in terms of potential earnings support, potential balance sheet re-fix and relative valuations.”

Infrastructure

Narain expects bigger infrastructure firms to perform better than smaller ones. “In this whole space, whether you play the larger construction companies or the smaller ones, I think the story lies with the largest among them,” he said.

Other Highlights:

• Political continuity comes as a tailwind.
• The government needs to push aggressively from fiscal, liquidity and monetary perspective to get the business cycle started.
• Indian economy is resilient to cyclical elements such as crude prices.
• Foreign investors are looking at India with very open eyes.
• Nature of money coming into the system for infrastructure will be different this time.

Watch the full conversation here: