Harsha Upadhyaya, CIO-equity at Kotak Mutual Fund said it would be difficult to rule out choppiness for the market especially with the Union Budget 2020 just a few days away and we in the middle of an earning season.

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Talking about his expectations from the budget, he said, “The focus would be on how government manages non-tax revenues given the fact that tax revenues are unlikely to show a big jump going forward.”

“The other thing which is more structural is that over the last decade, we have seen revenue expenditure growing at about 12 percent CAGR and we know that our economic growth rates have come down sharply below these levels, and if we continue to spend so much on revenue expenditure there is going to be a structural problem in managing our fisc. So we would watch out for that in the budget,” he added.

On top of that rather than just a consumption boost, we also need to see how sustainable economic activity would be post some of the policies that would come through the budget, he said.

"We would like to see some push for revival of investment cycle. The private capex is unlikely to pick up immediately given the fact that there is excess capacity across manufacturing industries. So, to that extent the government would have to facilitate credit flow that has got disrupted over the last 15 months or so, and also make sure that there is some public spending so that economic activity begins, which would then fuel the overall economic growth,” said Upadhyaya in an interview with CNBC-TV18.

Sector specific, Upadhyaya said, “We have been particularly bullish on cement, engineering and capital goods for the last several quarters and we are already seeing signs of these sectors outperforming the overall market.”

With regards to cement, he said more than volume growth they would benefit from better prices, he said.

Sharing the rationale for being upbeat on capital goods and engineering, he said there is relative valuation comfort. "Although, immediately we are not seeing any improvement in terms of order book, the expectation is that post budget, the order flow will improve and thereafter execution, " he added.

However, the house is underweight on the auto sector. There are more headwinds for the sector in terms of transition from BS-IV to BS-VI, price increases and consumer reaction to price increases, he said. “Overall we don’t think that the valuations are comfortable in this segment that one can bet on outperformance over the market. So, for us it has been more stock specific and overall sector has been an underweight exposure,” Upadhyaya added.

First Published:Jan 28, 2020 11:33 AM IST