ET Markets
Stock Analysis, IPO, Mutual Funds, Bonds & More

UltraTech & JK Cement are our top infra stock picks: Gautam Shroff, Edelweiss

The government has maintained fiscal deficit, but now a fiscal expansion is called for.

, ET Bureau|
Updated: Jul 03, 2019, 08.00 AM IST
Gautam Shroff-1200
A stimulus by the government will be the next trigger that will set the tone of the markets going forward, said Gautam Shroff, co-head, institutional equities at Edelweiss. In an interview with ET, Shroff said he expects another 50 basis points of repo rate cut in 2019. Excerpts:

Market euphoria has subsided post the elections. What is your take?
The largecaps and the headline indices are still taken care of by few names. At the same time, large block transactions have gone through. When such large blocks are getting mopped up in the market and have enough demand, it also depicts that for quality names, there are enough takers. Mutual funds are still sitting on quite a lot of cash which is yet to be deployed. Money is chasing quality paper and there is a lot of hope trade, given that headline indices have still not broken down. After the RBI move of cutting the repo rate by 25 bps, the next expectation is some kind of policy announcements or some kind of stimulus by the government closer to the Budget. That is something that will set the tone of the markets going forward.

What are your expectations from the Budget?
It is very clear that stimulus is required, and RBI action is required. RBI has done their part by doing a 25-bp cut but we still want to believe that another 50 bps for the year 2019 is something that is required because real interest rates are high in India. Income transfers will start soon. Consumer staples will start seeing action. Consumer staples volume had dipped, which will come back. There was lot of pessimism around overall consumption as a theme which will come back with government spending and income transfers. As far as leverage consumption is concerned, that will come only with easy liquidity. The government has been prudent all throughout and maintained fiscal deficit but this time around, as we need to steer or spur up the economy, we are prescribing a fiscal expansion.

Which are the sectors you are bullish on and what would you avoid?
Within infra, we like cement. We think the best is yet to come. Development and infrastructure is clearly on the agenda of the government. Our top picks are UltraTech and JK Cement. In the auto space, one can wait and watch. Auto is something that we will not buy in a hurry. Even if funding becomes available, the volume growth will come with a lag effect.

Also Read

Why Gautam Shroff is betting on Tata Motors & Motherson Sumi

Why Gautam Shroff would put fresh money in Asian Paints even at these prices

India is outperforming EMs and this party will continue: Gautam Shroff, Edelweiss Securities

Corporate banks can be a play for next 2-3 years: Gautam Shroff, Edelweiss Securities

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service