Govt will roll back part of stimulus: Jyoti Jaipuria
Inflation is now starting to get a bit of worry. So to that extent, the government will definitely roll back some part of the stimulus, some part of it would be of course the excise duty increases which we cut last time.
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| ET Now caught up with Jyoti Jaipuria, Head, Research, BAS-ML to know his views on stimulus rollback.
Will there be an excise duty roll hike. How are you reading all the statements coming out from the government, put it together with the economic data coming out, are you still expecting a substantial rollback in the budget?
Yes, the way I look at it, last year, we had two fears. One was that the whole world was falling apart and second was the fear that India would be part of it, so India's growth prospect would slow down. What also was happening at the same time inflation was very very low. So the government could afford to give much more stimulus.
Now all that has reversed, the world is improving though may be it is not like a great place but the Indian growth prospects are clearly very strong. Inflation is now starting to get a bit of worry. So to that extent, the government will definitely roll back some part of the stimulus, some part of it would be of course the excise duty increases which we cut last time.
So I will be very surprised if he just keeps the excise duties the way they are. The rollback is a part of it. So just remember, he gave a concession of around 600 basis points, so probably increases by 300 basis points and you still have 300 basis points more of concession given over the last two budgets then.
Our top sector for the year has been banks, and we like the banks and we continue to like it for this year because we think at these current valuations, risk reward in banks look attractive. There are three things, which will help the banks.
One is the fact that trade growth will pick up and that's really going to help in terms of top line as well as margin. Second thing, which helps them is as we move into the year and the recovery takes ground, the NPL worries will ease because the marginal borrower will now start repaying the loans back, which he was probably not able to do when things were not as good and the third thing, which helps them is the re-pricing of the deposits because a lot of deposits last year were raised 300-400 basis points higher than what they are today. So that would be one of our themes for this year.
Will there be an excise duty roll hike. How are you reading all the statements coming out from the government, put it together with the economic data coming out, are you still expecting a substantial rollback in the budget?
Yes, the way I look at it, last year, we had two fears. One was that the whole world was falling apart and second was the fear that India would be part of it, so India's growth prospect would slow down. What also was happening at the same time inflation was very very low. So the government could afford to give much more stimulus.
Now all that has reversed, the world is improving though may be it is not like a great place but the Indian growth prospects are clearly very strong. Inflation is now starting to get a bit of worry. So to that extent, the government will definitely roll back some part of the stimulus, some part of it would be of course the excise duty increases which we cut last time.
So I will be very surprised if he just keeps the excise duties the way they are. The rollback is a part of it. So just remember, he gave a concession of around 600 basis points, so probably increases by 300 basis points and you still have 300 basis points more of concession given over the last two budgets then.
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You expect some of the stimuli to be rolled back, for instance auto, cement as well as the interest rate sensitive, that entire space, what do you like and what are you pushing as themes going forward? Will you still choose some of those stories there or look at some of the other players?Our top sector for the year has been banks, and we like the banks and we continue to like it for this year because we think at these current valuations, risk reward in banks look attractive. There are three things, which will help the banks.
One is the fact that trade growth will pick up and that's really going to help in terms of top line as well as margin. Second thing, which helps them is as we move into the year and the recovery takes ground, the NPL worries will ease because the marginal borrower will now start repaying the loans back, which he was probably not able to do when things were not as good and the third thing, which helps them is the re-pricing of the deposits because a lot of deposits last year were raised 300-400 basis points higher than what they are today. So that would be one of our themes for this year.
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