DAILY VOICE | Budget 2021 should focus on manufacturing, removing infra bottlenecks: Atul Bhole of DSP Investment Managers

More manufacturing set ups can be attracted and incentivised by removing infrastructure bottlenecks in the road, rail and port connectivity alone, Atul Bhole, Senior Vice President – Investments, DSP Investment Managers said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

Q) Market seems to be steadily climbing higher. It looks like we could head higher towards 45,200-45,500 on the Sensex, and about 13,300 on the Nifty. What is your outlook on the markets for the year 2021? Are we going to see a similar momentum?

A) This seems to be a very much hated and narrow rally in the sense that a lot of money is still waiting on the sidelines with a lot of apprehensions. There is exuberance in few pockets, but by & large, the broader market still throws up a lot of opportunities.

Top-down view with liquidity, USD depreciation trade, recovery benefitting from low-base as well as lean supply chains & inflation, etc. is still supportive.

Next year, the nominal growth will be higher helped by recovery rebound & inflation which will, in turn, enable much rosier topline, and credit growth as well as better tax collections for the government.

Hence, the market can easily sustain and has still room to move up modestly even from these levels albeit with some volatility.

Other, and perhaps wiser, way to look at asset prices going up globally is that money is losing its value as it is in vast abundance.

A) Online and digital volumes have exploded, benefitting from the convenience factor, govt. reforms as well as a push by the financial system. The rapid transition towards online & digital transactions will be helpful for the entire system to build and support huge volumes with minimal costs as well as build a precious data repository.

It is extremely prudent on part of the RBI to intervene so as the trust, and confidence of people while undertaking such transactions don't break.

A pick

-up of the real estate cycle would be very beneficial for the overall economy as it is employment-intensive and many other sectors benefit from it - Atul Bhole

Q) What are your contra bets or themes for the year 2021?

A) I am hopeful that the real estate cycle starts again, maybe gradually. All the enabling factors like increasing affordability with stagnant prices for years, coupled with income growth that has happened over the same period, lowest in the decade mortgages rates, and some government incentives are in place now.

Real estate volumes have also picked significantly of late with ready-to-move homes inventory getting cleared.

A pick-up of the real estate cycle would be very beneficial for the overall economy as it is employment-intensive and many other sectors benefit from it.

Q) What are your expectations from Budget 2021? This will be an important Budget as the government would try and introduce measures that could help take India out of recession. What are your views?

A) Significantly higher fund availability for the infrastructure investments is required for many reforms like Make in India & Atmanirbhar Bharat to succeed.

More manufacturing set-ups can be attracted and incentivised by removing infrastructure bottlenecks in the road, rail, and port connectivity alone.

Firm steps to attract foreign capital by way of inclusion of Indian bonds in global indices, sovereign bond issuance, etc. should be explored again to make funds available at much lower rates.

Q) Mid & Small-caps seems to be the talk of the town because broader markets are outperforming in this rally. What is fuelling optimism in the broader market space, and will the momentum continue in 2021?

A) Selectively mid and small-cap companies can do very well benefit from the growth recovery and their relatively improved positioning vis-a-vis competition, especially in the unorganised sector. However one has to be careful about commodity inflation and try to pick companies that have pricing power with themselves.

Q) What should be the investment strategy of investors for the year 2021 – how much should one allocate towards large caps, mid & small caps, Gold, international investing, and fixed income.

A) The investment allocation will differ according to the risk-taking ability, age of the investor, among other factors. The current set-up seems to be conducive for asset prices to hold-up and gradually move upwards. Investing involves risk but holding cash or debt might also prove risky to an extent, as due to excess liquidity, money is losing its purchasing power.

Q) Vaccine will be a big theme as we enter 2021. Which are the vaccine plays one can look at?

A) There are not many vaccines plays in the listed space in India to benefit from. Largely, it will be carried out by government machinery and many corporates may provide supplies at nominal rates, keeping in mind the social benefit. Also, as it would be a one-time opportunity, a lot of value shouldn't be attached to it.