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Moreover, there is no need to read too much into the market movement on a Budget day. The Railway Budget saw rail-related stocks getting hammered that day, only to see these rise the next day. I expect the market to consolidate around these levels.
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Much before the Budget, we have seen a host of initiatives taken by the government. Now that the Budget is out of the way, attention will be on what the government does in areas such as coal, power, renewable energy, roads, goods and services tax, dedicated freight corridors, defence, railways and direct benefits transfer.
The steps taken should translate into higher economic and earnings growth over the next couple of years. Low commodity prices, falling interest rates and improved business & consumer sentiments, should help drive higher earnings growth in FY16.
Foreign institutional investors will continue to keep India high on their wish list as the Budget provides reasonable clarity of thought and vindicates their pro-reform agenda.
Visible growth on the ground and improvement in corporate profitability in the coming quarters will result in a further rerating of the market. Banks are a good proxy for the economy and I would watch this sector closely. Though few private sector banks would be the first choice, the public sector banks also offer better valuation if the overall economy is set to prosper.
Nirmal Jain
Chairman, IIFL
Chairman, IIFL
