Automobile and textile among 7 sectors that could benefit from the Union Budget 2021

The government should make further announcements around the Production Linked Incentive scheme in the Budget considering the early success in mobile, API, and medical devises sectors,” said Divam Sharma, Co-founder of Green Portfolio in an interview with Moneycontrol’s Sunil Shankar Matkar.

The Narendra Modi-led NDA government will present the Union Budget 2021-22 on February 1.

Sharma, a member of The Institute of Chartered Accountants of India, believes the key sectors that would be in focus are the ones where employment generation can be maximized keeping the emphasis on AatmaNirbhar Bharat.

Edited Excerpts:-

Q: The Union Budget is scheduled for February 1. If you are a Finance Minister of India, then what could have you done to revive and strengthen the economy?

Infrastructure development through innovative sources of funding should be the core of the 2021 Budget as it has a high multiplier effect on GDP, and strengthens the Governments vision to AatmaNirbhar Bharat. For showcasing India’s competitiveness as a diversification strategy to China, infrastructure development will be the key.

2020 has shown us the importance of human life and attention to the medical needs of people. An additional emphasis should be laid on increasing medical infra through a public-private partnership model.

The government should do further announcements around the Production Linked Incentive scheme in the budget considering the early success in mobile, API, and medical devices sectors.

Q: Can you name the key sectors which could be in focus in the Union Budget 2021, and why?

Key sectors that would be in focus are the ones where employment generation can be maximized keeping the emphasis on AatmaNirbhar Bharat. There would also be an emphasis on incentivizing import substitution, exports, and setting up manufacturing in champion sectors.

Automobile, Textile, Pharma, Medical Devices, Electronics, Power Equipment, and Infrastructure would be the ones benefitting.

Q: Nifty Bank index hits record high levels, rising 58 percent in the last three months. Do you think the worst is over for the sector?

For Banking companies, the opportunity to enhance customer penetration is huge. We are seeing an increase in credit offtake and banks are taking back some of the business they lost to NBFCs. Selectively, in banking great investing opportunities still prevail. However, many banks are still not out of the woods when it comes to the NPAs.

Q: Should investors prepare for a major correction of around 10 percent from current levels in 2021? Also, will the market give a double-digit return in the current year?

2021 should be the year when the market rally further broadens to midcaps, small caps, and value stocks in particular. With liquidity chasing various assets, stocks trading at considerable valuations to their book values should do well. Many double-digit returns opportunities are still available in the market for 2021.

Q: FIIs net bought more than Rs 1.6 lakh crore in 2020. Do you think the FII inflow would be more in 2021 than in 2020, and why?

FII inflows in 2021 shall be higher than 2020 flows. With markets in the USA trading at higher valuations to developing economies, the accommodative stance of federal banks across the globe, and many countries continuing to provide financial stimulus to their economies, foreign capital will continue to chase equity investments in developing economies like India.

Other factors like an increase in weight in the MSCI Index, investors wanting to diversify from China, and higher interest in Indian equities as compared to other developing economies will play a major role in the continuation of higher flows to India in 2021.

Q: What are five key mistakes investors should not repeat in the year 2021 after great learning from 2020?

1. Do not discontinue SIP when the markets are volatile.2. Do not try to time the markets, continue investing through a disciplined approach. Many investors pushed their investments waiting for a market fall and were never able to invest.3. Avoid leverage as much as you can while investing. Many leveraged investors faced a wipe-out of their capital when the markets faced a drastic fall on March.4. Not diversifying your investments. Many investors lost out on making money in Equities and Gold as they did not have exposure to these asset classes.

5. Jumping the ship from one investment to others. Investors should keep it simple, and not switch or cash out investments too frequently as then they lose out on opportunities like 2020.

Q: What are your broad expectations for the third-quarter earnings season that started off this week? Will the third-quarter earnings give a proper indication about the FY22 earnings season or should we wait for Q4 earnings also?

Q3 earnings should be better than Q2 and hence give further confirmation to the good numbers that companies announced in Q2.

Many economic indicators like power consumption, PMI, GST collections, Auto sales, and commentaries from management are reflecting a positive outlook for Q3 and subsequent quarters.

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