Mayuresh Joshi Answers: FMCG, IT, and Realty Sector Predictions Amid Major Infra, Railways, and Highways Investments!

“There will be significant budget allocations for defense. We’ve also heard statements about rural and urban affordable housing. This means investments in roads, railways, highways, ports, infrastructure, and manufacturing will continue,” says Mayuresh Joshi, Head of Equity at Marketsmith India.

This week, the focus has been on the budget, covering infrastructure, defense, fertilizer, and cement. What should we focus on now? Will these sectors keep growing?

Market Expectations and Budget Impact

Joshi notes two key points: First, the markets are eagerly awaiting the upcoming budget announcements. At Marketsmith India, we believe the ongoing reforms over the past decade will continue, with no major changes in capital allocations for the Modi government’s schemes. Infrastructure development and budget allocations are expected to double in the next five years.

Second, regarding market reactions post-budget, we expect no negative surprises. The budget is likely to stick to fiscal consolidation, which should be positive for the markets. The additional ₹1 lakh crore gives the government room to allocate funds to infrastructure and reduce the fiscal deficit. Contrary to fears, there should be no excessive giveaways, leading to prudent budget allocation. As a result, earnings should hold up in the 30-40% range.

Sector Performance and Recommendations

Domestic cyclicals will likely continue to do well. Sectors like defense and railways have seen significant growth. We believe selective stocks in infrastructure, cement, water treatment, and water allocation will also benefit from the budget. Consumer staples and discretionary spending should start performing better.

With good monsoons expected, rural earnings should recover in the second half, boosting these market segments. A balanced portfolio approach, including some pharma stocks, can hedge against domestic cyclical overweights. Overall, we remain optimistic about the market.

Real Estate, FMCG, and IT Sector Outlook

Real Estate:

Joshi remains positive about the real estate sector. With the extension of the PMAY scheme, the sector could continue to rally. We are currently in the middle of a six-year real estate cycle. The pre-sales velocity for major players has been impressive, with launches by companies like DLF, Sobha, and Kolte-Patil selling out quickly. The demand for premium properties remains strong. Real estate ancillary stocks, like Greenlam Laminates and Century Ply, are also expected to do well as new and existing homes need refurbishing.

FMCG:

The FMCG sector has been underperforming recently, but this could change. A good monsoon season is likely to boost rural incomes, which are a significant part of FMCG sales. As rural incomes rise and discretionary spending increases, we can expect significant volume growth. Advertising spends and product size increases without price hikes may normalize, leading to better performance in the second half of the year.

IT:

For the IT sector, Joshi advises waiting for Q1 results. Midcap IT stocks have performed better than large-cap ones, with consistent order flows and stable margins. However, large-cap IT companies are still facing challenges, particularly in the BFSI sector in North America. Retail and manufacturing in Europe and America should recover in the second half of the year. Joshi suggests holding midcap IT stocks but waiting for Q1 results before making decisions on large-cap IT stocks.