May not see a strong pre-budget rally, post-budget time to matter more: Dipen Sheth, HDFC Securities

In a chat with ET Now, Dipen Sheth, Head-Institutional Research, HDFC Securities, shares his views on the risk that a weak monsoon poses for the economy as well as the chances of a pre-budget rally. Excerpts:

ET Now: How are you assessing the risk that a weak monsoon poses for the economy?

Dipen Sheth: We have confirmed statistics about the fact that the monsoon is not quite what we have been aspiring it to be. You can ascribe it to the El Nino or something else.

Yes, there would be real risks if we have a poor monsoon and so far, the indication is very much that we will have a poor monsoon, although there is time to make up.

So July can make up for whatever deficiency that we have seen in June. Therefore, the headline risk with a poor monsoon is obviously the fact that the tilt towards FMCG consumption at the national level will be disproportionately felt and food inflation can stay stubbornly high. I am talking more with respect to perishable commodities in the food basket.

So these two, according to me, are the big risks in case the monsoon is not quite what we wish it to be. This is more from an investment or stock market perspective.

Do keep in mind that if the monsoon is significantly below par, it would be a human challenge. It is quite tragic that it is so and 67 years after independence we are still grappling with how to manage water well enough in this country. That is a bigger comment on the monsoon being bad.

ET Now: What are the chances of a pre-budget rally this time around, on hopes that a whole lot of reforms are going to come about, once the Budget is tabled?

Dipen Sheth: Here I would be on the other side of the fence. We have been conditioned for far too long to anticipate a pre-budget rally and then you buy on hope and sell on news.

I do not think that is quite the case this time. We have been maintaining for the last few budgets that budgets involve just another day in the finance ministry and an important day in the calendar year.

This time around, the budget does really matter because there is a new government in charge, it has come in on a refreshingly mature mandate and it is times like this when we will look for the government to deliver on its promises and to show the way forward in terms of how it intends to take the country forward.

According to me, this is a very important budget. There is lot of uncertainty around it and so you may not really see a significantly strong pre-budget rally, but if the Budget has what I hope it to have and what millions of Indians hope it to have, then it will actually be the post-budget time that will matter much, much more.