After the government said yesterday that it plans to borrow Rs 50,000 crore less than the proposed Rs 6.05 lakh crore in the Budget, top fund managers say that the move bodes well for the equity markets.
After the government said yesterday that it plans to borrow Rs 50,000 crore less than the proposed Rs 6.05 lakh crore in the Budget, top fund managers say that the move bodes well for the equity markets. In an interview to ET Now, Vetri Subramaniam of UTI AMC said, “The good news is that the government seems to have reacted to the chatter in the markets, addressing concerns about higher yields. This is a good sign. To the extent that interest rates don’t come under undue pressure, on account of fiscal deficit or the fiscal borrowing programme, it is good news for equities.”
DEA Subhash Chandra Garg said on Monday that the government plans to borrow Rs 2.88 lakh crore (47.5%) in the first half of 2018-19 as compared to Rs 3.72 lakh crore (60-65%) during the same period in the previous year,” implying a drop in borrowing of nearly 22.58% on year.
Saying that the the stock markets will remain tricky as valuations are not cheap, Vetri Subramaniam emphasised that investors will have to be choose stock selectively. “Valuations had moved up quite a bit. We have seen a 10% correction come through since January, earnings are up by about 7-8%. It’s going to remain a tricky territory in the stock markets,” he told the channel.
So where exactly should the investors look for attractive stock picks? “If the wholesale funding rates were to cool off substantially and sustainably, my take is that NBFC as a sector that had taken a massive pounding post January-18, may see a sharp rebound as a result of renewed interest from investors,” Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher told FE Online.
In the same interview, Vetri Subramaniam said that private corporate sector banks with healthy capital adequacy ratios are poised to do well. Meanwhile, reversing recent trends, the stock markets rallied on Tuesday morning with the Sensex zooming 100 points on opening to above 33,300.