Budget 2019: Go for rural themes with a short-term perspective, says Mahesh Patil, ABSLMF
2019 could see mild volatility as lots of macro headwinds have eased off, says Patil.
Let us start with the key theme and outlook for 2019. What are you expecting?
2019 could experience mild volatility. I do not think it will be as large as we saw last year because there are lots of macro stability coming in. Last year, we had some macro headwinds and that has kind of eased off. There is external stability or outlook on oil prices. Oil should stay in $50-70 range. That should not really pose much of a challenge in terms of current account deficit.
The inflation outlook is also fairly benign. We do not see any increase in interest rates. If at all a pause or a mild cut is there, all these macro factors are looking fairly sanguine and fairly moderate. That apart, on the global front, there could be more volatility and concerns could come in either form trade wars or what happens in the euro zone or in China. But those are the factors which would lead to slightly higher volatility over there.
After some time, we are seeing some recovery from earnings.
How are you positioning yourself for the upcoming budget and what would be the key expectation from the event?
We are not really looking too much into this budget because being just before the elections. I do not think much could be expected in terms of big policy decision in this budget but by and large, the narrative would be towards trying to go for a feel-good factor and some kind of a stimulus for consumption.
It will be pro rural and the general consumer sector is a better way to play. The focus should be on the low-ticket discretionary consumer items. The rural push would be there. We expect some kind of a money flow into the hands of the farmers because of farmer distress and one could play some of the rural themes purely from a short-term perspective.
Do you think that some of FII money that went out last year could come back this time?
Last year, the FII outflow was on the back of strong US dollar. This year as we move in, the outlook on US dollar appears to have peaked out and we are seeing some easing off of that. That should see a reversal of flows into the emerging markets.
Also the global growth differential of emerging markets versus the developed markets is now trending positive, The emerging markets, by and large, should show a better growth than the developed markets. The overall allocations to emerging markets should look better this year and any indication of that could be seen in last one month or so inflows into emerging market ETFs have improved and India’s weightage in the emerging market funds has come off because of the selloff we saw in the last calendar year.
With macro stability coming back into India, one can expect the FII flows to be positive.