Budget 2024: MOSL’s Market Perspective and Stock Recommendations

Market Overview:

• MOSL’s equity market perspective sees the budget reinforcing India’s strong macro-micro positioning in a fragile world.
• Preference for sectors like PSU Banks, Industrials, Real Estate, Consumer Discretionary, and NBFCs.

Budget Review:

• The Interim Union Budget maintained the fiscal deficit consolidation path without introducing new schemes or incentives.
• Fiscal deficit for FY25 set at 5.1% of GDP, indicating a consolidation of 70 basis points, contrary to market expectations.
• Nominal GDP growth estimate for FY24 revised down, highlighting the government’s commitment to the 4.5% fiscal deficit target for FY26.

Strategic Approach:

• Budget’s credible math with 10.5% nominal GDP growth and a 5.1% fiscal deficit for FY25E.
• Strategic fiscal consolidation during a high-stakes election year bodes well for India’s rating perspective.
• Consumption lacks near-term push in the budget, affecting corporate earnings amidst weak demand.

Market Strategy:

• Equity markets expected to benefit from a long-term focus on fiscal consolidation and capex.
• Anticipation of a quasi-goldilocks scenario with 7% GDP growth and 15% Nifty earnings CAGR over FY24-26.
• Market likely to shift focus to corporate earnings trajectory, with over 20% earnings growth expected for Nifty in FY24.

Sector Preferences:

• MOSL prefers PSU Banks, Industrials (Capital Goods, Cement), Real Estate, Consumer Discretionary, and NBFCs.
• ‘Underweight’ on IT and Metals. Recently upgraded Energy to ‘neutral’ and downgraded Auto and Pharma to ‘neutral’ in its model portfolio revision.