V. Balasubramanian, the chief portfolio strategist at Mahindra Mutual Fund, expects Indian equity markets to remain range-bound after the Union Budget, which will be presented on July 5.

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Sharing his budget expectations, Balasubramanian said he would be focusing on the income tax slab exemption, which was earlier declared in the interim budget and the fiscal deficit target.

Here are the edited excerpts of the telephonic interview:

1. What is your market outlook in the near-term given the volatility we are experiencing at the moment?

I believe that most of the known positives have already been factored into stock prices. ­In the last 5 years, sales growth and PAT growth have been negligible due to the slowdown in China production, monetary normalisation, volatility in commodity prices, consumption slowdown, GST and various other reasons. The government funding kept the economy and markets in shape. In fact, lately, the markets have been focusing on four major developments- MEET (Monsoon, Election, Earnings, Trump). The key factor is monsoon which is crucial for the market improvement. Even if the monsoon is below-normal then it should do well for the sectors. Therefore, it’s expected that Nifty will be volatile under the range of 500-600 points. Breakdown of monsoon should give some cheer to the markets. We don't see any major move, markets will be range bound.

2. Are there any specific companies or sectors responsible for the pain in the market?

Personally, I don’t believe that the NBFCs are playing a big role behind the pain in the market. There are a lot of other factors involved in market pricing like geopolitical relations, overall consumption space, macros and various others. In fact, the pain in the market is much lesser than what it was two months earlier. The situation is somewhat improving currently if we come to compare it.

3. Will the Union Budget impact the markets in any way? Also, what major tax reforms are you expecting this time?

I don’t think the Budget will affect the markets majorly. Everyone’s focus would be on key concerns like infrastructure spending, doubling of farmers’ funds, fiscal deficit and other reasons. My large focus will be on the income tax slab exemption, which was earlier declared in the interim budget. All eyes will also be on the fiscal deficit target.

4. Do you see Union Budget aiding overall consumption?

A good monsoon will set the tone for markets and consumer spending. I also think that the December earnings will see the visibility of growth. Consumer spending will come across as the government makes progress on that front. As overall income increases and people start spending money, consumption sector will also see growth.

5. Where would you suggest investing in: large caps, mid-caps or small caps?

Well, it depends from person-to-person. Mid-caps and small caps have a lot of opportunities. Investment in them can bring in positive returns to the portfolios’. However, the large caps are slightly expensive now but quality large-caps can’t be ignored. So, one can invest mindfully in all these three categories.

6. How would you suggest investors allocate capital?

Look for quality stocks that can withstand any pain in the markets. The only mantra here is only ‘growth’. My suggestion would be to invest in mutual funds. Mutual funds are a safe investment tool for investors who are aiming to receive long-term growth. Also, keep debt as a strategy in the back of your mind.

7. If you had Rs 1 lakh in-hand, in what percentage would you divide the money into mutual funds, stocks and bonds?

I highly suggest mutual funds for beginners. People who are looking for a 3-year period time can create a hybrid portfolio with 60 percent capital in equity and rest in other investment tools like bonds, mutual funds or others. The key thing to remember here is that equities will give you better returns if kept for a longer period of time.

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First Published:Jul 3, 2019 10:20 AM IST