The Indian rupee is likely to depreciate which could see FII selling, particularly those names where private equity holding is high, and consumer tech and other self-proclaimed tech companies, according to Motilal Oswal, MD & CEO, Motilal Oswal Financial Services.
Sectors like infrastructure, real estate, industrials, financials, information technology and pharmaceuticals are likely to outperform while consumer staples and discretionary likely to underperform, he said.
Oswal said the writing was there on the wall. Any sudden and sharp fiscal consolidation steps announced could have throttled the nascent and uneven recovery of the Indian economy.
A 6.9 per cent fiscal deficit target alleviates that pain. The successive waves of the pandemic have made it more difficult to reduce government debt as a share of GDP in the medium term. The Budget has focused on boosting overall demand though and has invested more in infrastructure.
“We are in a high growth, high inflation environment. The commentary around RBI raising rates in its coming meeting would be that much more relevant. Having said that, in my opinion, equity markets in India are likely to see 20,000 on the Nifty and about 65,000 in Sensex by December 2022 on the back of 15-20 per cent earnings growth in FY23,” he said.
The journey, however, is likely to be very volatile. Markets will test patience on the downside as markets adjust to higher risk premiums on the back of an impending increase in interest rates, both globally and locally.
Market sources said that Finance Minister Nirmala Sitharaman may not have answered the wishes of many people. They can see it as a key negative takeaway of the Budget.
“The key negative is the lack of transparency. Not mentioning ‘end of bonus stripping’; comparing FY23BE capital expenditure with FY22BE instead of FY22RE are a couple of examples that may hurt the investors’ sentiments on Wednesday morning,” sources said.