Investors to look for budget to address consumption slowdown

Mumbai, May 28 (IANS) The stock markets is now showing signs that the election euphoria is over and experts say that the investors will start to bet on the government's steps to revive the slowing economy.

Among the most important steps required, said Kamlesh Rao, MD and CEO, Kotak Securities, would be to address the concerns of slowdown in consumption.

Consumption in India has slowed due to several factors, chiefly owing to low rural demand. Several experts have attributed this to effect of disruptive measures like demonetization.

Investors will count on the budget, due in July, in boosting Foreign Direct Investment (FDI) and consumption.

"Once the election euphoria subsides, market would look forward to global events like the US-China trade war, resolution of issues facing the economy at large and liquidity and credit growth in particular," a Kotak Securities statement said.

"RBI policy and Union Budget would be the key events to watch out in the near future," it added. It was further noted that the government would need to implement further reforms to attract FDI in various sectors of the economy.

In terms of market cap orientation, Kotak Securities reiterated that it sees more value in Mid and Small Caps rather than Large Caps at this stage.

From their respective peaks in January 2018, the Mid Cap Index and BSE Small Cap Index have underperformed the Nifty-50 by 25 per cent and 33 per cent, respectively, Kotak said.

"Based on Bloomberg estimates, the Mid Cap Index is now trading at 15.3x forward PE Vs 18.3x forward PE of Nifty-50," it added.

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