Originally published in: https://www.moneycontrol.com/news/business/markets/daily-voice-this-fund-manager-with-experience-of-over-2-decades-has-advise-for-retail-investors-post-budget-6492381.html

Retail Investors would indeed laud the budget as it has touched upon the key imperative sectors of the economy, says Kumar.

Niraj Kumar, CIO, Generali Central Life Insurance highlights that the Budget has laid the foundation for a growth conducive platform which will percolate into strong equity market performance over the next few years.

In an interview with MoneycontrolÂ’s Kshitij Anand, Niraj Kumar, who has about 20 years of experience in the capital markets, said the retail investors will be prime beneficiaries of this growth-oriented Budget, as the investment impetus would manifest into growth numbers and markets will reward those who are looking for long-term wealth creation.

Edited excerpts:

Q) Your first reaction to Nirmala Sitharaman landmark Budget. How would you rate the Budget on a scale of 1-5 and why (5 being the best)?

A) The Budget 2021 has delivered on all fronts and has been embraced ecstatically by the markets as it has delivered an ‘All-inclusive, Pragmatic and a Progressive Growth-Oriented Budget’.

This is clearly a bold expansionary Budget, which prioritises ‘Growth’ and has chalked out a very different FRBM Roadmap than what we have seen conventionally over the last decade.

The Government has finally taken on the mantle of pump-priming the growth by focusing on reviving demand by making investment and by putting more money in the hands of the consumer through Capital spending & creating employment opportunities.

The Budget was bold and visionary with the focal point being the requisite growth push reforms, which will have a far-reaching impact and the potential to drive economic growth for the next few years.

Infrastructure took the centre stage with the setting-up of Development Financial Institution (DFI) with an immediate capitalisation of Rs 20,000 crore and was complemented with the bold move of cleaning up of NPAÂ’s in the financial system by the creation of an ARC to improve the financial ecosystem.

Besides the liberalisation of FDI limits in the insurance sector to 74%, further testifies the governmentÂ’s conscious efforts to facilitate deeper penetration of Insurance in the country.

While these pro-growth measures have come at the expense of higher fiscal deficit and deferment of the fiscal consolidation glide path, we reckon resuscitating the growth was crucial and bound to take precedence at this point in time.

Overall to encapsulate, the Budget was a historic one leaving no major stones unturned and was indeed bold in intent and large in its ambition and we would thus rate it close to 4.5 on 5.

Q) How should retail investors decode the Budget 2021?

A) Retail Investors would indeed laud the Budget as it has touched upon the key imperative sectors of the economy.

The BudgetÂ’s focus to push the pedal on investment is critical, given the positive spillover effects that capex has on the economy in terms of growth, development, and employment generation and in turn, will bode well for markets and retail investors.

Besides, the Budget has also incentivised the real estate/affordable housing buyers by extending the timeline for availing the deduction on interest under the PMAY scheme for another year.

Overall, we reckon retail investors to be the prime beneficiaries of this growth-oriented Budget as the investment impetus would manifest into growth numbers and markets will reward those who are looking for long-term wealth creation.

Q) What should be the investment strategy post Budget 2021? Should investors use the dip to rejig their portfolio?

A) Investors should deem equity markets as an asset class for long-term wealth creation. They should solely focus on the long-term potential of the markets.

And rightly so, this Budget has laid the foundation for a robust growth conducive platform which will percolate into strong equity market performance over the next few years.

We believe that the investors should use the opportunity to deploy funds as and when they get weakness. One should keep investing as per an individualÂ’s goals.

However, at the same time, itÂ’s important for the investors to be mindful and not to get euphoric and maintain the discipline of asset allocation.

Q) Do you think the government managed its finances, and at the same time delivered a Budget that could boost growth?

A) The Budget 2021 has touched upon the key chords in terms of finances by sharply increasing the budgeted capex expenditure with mobilization of funds for infrastructure, while keeping the revenue estimates conservative, along with strong targets for divestments.

With expenditure mix being skewed towards capital expenditure in FY22, it bodes well for growth as it tends to have a maximum fiscal multiplier impact.

While the deficit for FY22 is projected to decline to 6.8% of GDP from an expected 9.5% of GDP in FY21, the pace of the fiscal consolidation roadmap remains discernibly lower with deficit pegged at 4.5% of GDP in FY26.

However, we believe the expansion in fiscal deficit was imperative at this juncture, given the incipient nature of the recovery and the pivotal role that government spending would play in terms of reviving the economy on a sustainable basis.

Hence, the Budget was a shot in the arm in terms of fiscal expansion being focussed on Investment push, which will act as a booster dose for growth, having a cascading impact on the economy.

Besides, the government should be applauded for the most positive step of bringing in transparency in the Budget by the inclusion of the food subsidy bill of Food Corporation of India (FCI) in the Budget, which was classified under Extra Budgetary resources hitherto.

Q) Which sectors are likely to benefit the most from the Budget and why?

A) With capital spending being at the front and centre of the Budget, the key beneficiaries in terms of sectors would be the old economy sectors such as Infrastructure & Construction, Cement, and Metals etc.

Besides, the hallmark move in the budget with respect to cleaning up of NPAÂ’s in the system & reviving the capex cycle will make the financial sector a prime beneficiary.

We believe the construct of an ARC to tackle the bad loan problem will bring a transformational change in the financial landscape of the country.

This will free up a significant amount of capital for the banking sector & will hasten the resolution process. Also, the intent to privatize two public sector bank is a commendable move.

Further, more than the sectors, we reckon that the rally in markets will get broad-based, as we have seen historically that Mid-caps tend to disproportionately benefit from a recovering economy. We expect significant operating & financial leverage to play out in these companies.

Q) Which sectors could lose because of Budget proposals and why?

A) As we know that the budget has been a holistic one and has accomplished most of the expectations, it would be a little difficult to handpick sectors that are likely to be adversely impacted.

Nonetheless, we think targeted redressal of certain reeling service sectors such as the Travel and Hospitality industry was something that was not touched upon by the Budget.