Which stock to buy ahead of Budget 2024, Q1 result season? Nischal Maheshwari of Centrum Broking explains

25/06/2024

All eyes are on the forthcoming Union Budget which is set to be tabled in July. There are expectations that the government will continue to zero in on manufacturing, defence, and railways sectors. Meanwhile, India Inc. will also announce its June quarter earnings which will give further direction to the markets which are hovering at their record highs. So, what is the right strategy to make money going ahead? And what should investors expect? In an interaction with BTTV, Nischal Maheshwari, CEO, Centrum Broking said that undervaluation in the market has gone and you may not see any improvement in the price-to-earnings (P/E) ratio.

Therefore, the 50-share index Nifty will grow at the pace of earnings. “Nifty may touch 24,000-24,500 by December.” The 50-share index traded at the 23,581-mark in morning trade on June 25.

However, he added that the government is focused on manufacturing particularly on defence and this will continue to create value. Maheshwari is positive on Hindustan Aeronautics (HAL), Bharat Electronics (BEL) and Solar Industries with an investment horizon of 2-3 years.

“We are also positive about electronic manufacturing services (EMS) as the government is trying to reduce imports. This is one strategy you should look for 2-3 years. We are also bullish on green energy.”

Maheshwari also believes that the government may address the rural stress issue in the forthcoming Union Budget and this is also visible with the announcement of a rise in minimum support price (MSP). The Union Cabinet chaired by PM Narendra Modi on June 19 approved the increase in the MSP for all mandated Kharif Crops for 2024-25 to ensure remunerative prices to the growers for their produce. According to reports, Finance Minister Nirmala Sitharaman is likely to table the Union Budget for FY25 on July 23 or 24.

“Similarly, the government will take more steps to help the rural sector. Rural consumption has started showing some green shoots. For the next one or two quarters, rural consumption will be a strong play for investors. In the FMCG sector, we like companies such as Dabur, Emami and Hindustan Unilever (HUL) to play rural theme,” he said adding railways will continue to do well.

The market watcher highlighted that the government is focussed on railways, “The government is enhancing mass transportation infrastructure, particularly in the railway sector. Significant improvements are expected, with potential higher budget allocations.” He sees robust growth in the sector as a result of these initiatives.

On the PSU front, he advised investors to adopt a stock-specific approach. “There is a bit of froth in a lot of PSUs at this level,” Maheshwari said. The BSE PSU index has rallied 169% in the last two years till June 24, 2024, while the benchmark BSE Sensex has gained 47% during the same period.

Sharing his views on the forthcoming corporate results in July, he said earnings are tapering off. “Growth at the top lines is not at the same level as it was two years back. We expect 10%-12% kind of earning growth against 15%-16% earlier. However, he believes that banking will do well as credit costs are high. “We may also see interest rate cut by the end of the year. We are positive on the private banks,” Maheshwari said, adding he sees some improvement in the FMCG space.

On the other hand, he thinks that the information technology (IT) sector may continue to post muted earnings for the quarter ended June 2024. “The US has its elections this year so there will be some amount of uncertainty. Corporates will wait and watch before committing fresh capital,” Maheshwari said.

“Manufacturing, especially defence will do well, due to strong orders. We may see some slowdown on the infrastructure side due to elections in the last quarter. Cements will also see some slowdown in the forthcoming quarterly results,” he said. The market veteran also said that April-June emerged as a good one for the FMEG pack. “Air conditioner (AC) companies have seen 35%-40% kind of growth this summer season,” he said. Shares of AC majors such as Voltas and Blue Star have advanced 79% and 54% on a year-to-date basis till June 24, 2024.

As far as manufacturing is concerned, he also advised investors to keep power companies such as Triveni Turbine and Tega Industries on the radar. “These companies have strong order books and margins. Investors should keep some powder dry and wait for dips before buying these companies,” he said, adding investors should keep a 15%-20% portfolio in cash considering the present market condition.

On asking how to invest Rs 10 lakh now, Maheshwari said investors should immediately invest 50% of money in the stock market. “Choose your funds and wait for the correction to deploy more money,” he said.

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