Expert view: Rupee weakness serious risk; govt, private capex key market catalysts, says Devang Kabra of Wallfort PMS | Stock Market News

Expert view: Devang Kabra, co-fund manager at Wallfort PMS, expects the government to maintain fiscal prudence in Budget 2025. In an interview with Mint, he said the Indian stock market expects the Budget not to have any negative surprises. The distribution of freebies and social security for the poor should not be at the cost of fiscal immaturity.

Edited excerpts:

What is the market hoping from Budget 2025?

In the year 2025, the market hopes the government will not rock the boat that is sailing smoothly in terms of corporate earnings.

The market hopes that the government keeps spending on its capital expenditure with fiscal prudence, which creates a positive effect in the private sector.

The government is hoping for a robust monetary policy that will help control inflation and maintain the rupee at its current levels.

The rupee depreciation risk for markets is larger than people otherwise assume.

Of course, another item on the wish list is a reduction in taxes, or if not a reduction, the government should not raise the tax rates from the current regime.

As promised by the Finance Minister, there should be more norms to simplify the taxes.

Overall, we need a balanced budget that aligns with previous ones and has no adverse surprises. Most importantly, the distribution of freebies and social security for the poor should not be at the cost of fiscal immaturity.

What would drive the spirit more- tweaks in income tax rates and slabs or easing of LTCG norms?

The SEBI and the stock exchanges work relentlessly to reduce the speculative activity of retail market participants.

All their rules are directed towards discouraging their speculative intent.

Reducing long-term capital gain tax and eliminating the cess and surcharges on it would only encourage retail participants to hold on to delivery-based stocks for the long term and reduce their speculation activities.

In fact, the LTCG tax should be reduced without reducing short-term capital gains or the tax on speculation gains.

For income tax slabs, the fine print should be done away with to simplify the whole process.

Secondly, there should be some incentives designed for tax-paying citizens so that more population is brought under the ambit of income tax.

What will be key triggers for the market after the Budget?

The biggest key triggers are government and private capital spending (capex).

The government capital spending should surely increase compared to the previous year.

The budget provisions should be made in such a way that they further encourage private capital spending.

Where do you see opportunities in the mid and small-cap segments?

Opportunities exist in agriculture and allied sectors, companies related to water, waste and materials recycling, employment and skills, service businesses related to AI, data science and analytics, urban development, renewable energy, infrastructure EPC, data centres, etc.

Why are we witnessing relentless selling by FPIs? When can the trend reverse?

The relentless selling by FPIs at this time is not driven by better market opportunities outside Indian markets.

It is more driven by the recent currency depreciation, the rise of crude oil prices, and the fact that the US Fed has not agreed to reduce interest rates.

The FPIs are getting a 5.5 to 6 per cent risk-free return on US Treasury bonds, which is a big deterrent to remaining invested in India.

The depreciation of the Indian rupee against the US dollar adds salt to the already inflicted wound.

Having said that, at some point in time or another, the selling will stop and be converted into buying since the FPIs and FIIs are already oversold in India.

Three to four years of long-term corrections in many Nifty 100 names should be over sometime in the future once the tables turn in our favour.

How can retail investors protect their wealth amid current market volatility?

Since Covid, the last four years have rewarded anybody who pressed the ‘buy’ button.

However, the next couple of years will reward the participants who have tried to study the fundamentals of the investee company and ensure that they are not paying hefty valuations for the same.

These markets are for investing in specific and selected names where valuation and earnings are unfolding, and the investment is made at the right time.

This full-time job requires much research expertise that all retail investors would not generally have.

The best bet for retail investors in these turbulent times is to entrust their funds to professional and portfolio managers and avoid dabbling on their own in the markets for the next 12 to 18 months.

What sectors are you positive about for the next one to two years?

Agriculture and allied sectors, companies related to water, waste, and materials recycling, employment and skill, service businesses pertaining to AI, data science and analytics, urban development, renewable energy, infrastructure EPC, data centres, etc.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint.