Capex-heavy sectors will see a significant boom after Finance Minister Nirmala Sitharaman’s 33% capital expenditure boost in Union Budget 2023, with 75% of the expenditure proposed to go towards infrastructure. However investors must give attention to the banking and financial sector, since the BFSI sector is cheap and has momentum, which may lead to outperformance, said Sahil Kapoor, Vice President & Head – Products & Market Strategist, DSP Investment Managers. The banking, financial services and insurance sector companies currently have healthy balance sheets, low valuations, and healthy credit growth, Kapoor said in an interview to FinancialExpress.com.
The Budget 2023 doesn’t disrupt the momentum of the market or economy, Kapoor said, adding that the budget was a good take on the economy as the numbers were largely in line with the street’s estimates and the GDP data and estimates seemed reasonable. While experts cheered the massive hike in the government’s capital expenditure to Rs 10 lakh crore, Sahil Kapoor said the importance should be focused on the overall kitty, where the revenue expenditure is comparatively lower.
Overall, the Union Budget 2023 didn’t contain any implications or provisions that would spook the markets, therefore the attention was redirected to other factors. In the short term, the market’s valuations are getting burned off which explains the current correction but does not pose a concern, he added, stating that the focus should be more on earnings growth.
Retail investors with a moderate risk appetite should divide their corpus, allocating between 50-55% to equities, 30-35% to debt instruments and between 5-10% to gold. For those who are not averse to risk, the allocation towards equity could be raised to around 70%, said Kapoor, recommending investors remain overweight on equity.
The pecking order Kapoor set for equities ranked the financial sector as the top industry to focus on, especially since it had a stellar rally last year. Following BFSI, he placed healthcare and pharma second and the auto industry third. At the bottom of the rung, he placed industrial goods and infrastructure, claiming poor valuations and lack of a good rally. He recommended that investors critically judge mutual funds’ weightage on sectors and pick the ones with a decent sectoral blend.