Corporate profitability must improve if the government is to meet its fiscal deficit target for next year, according to Sudhakar Ramasubramanian, MD, Aditya Birla Money, a brokerage and wealth management firm with 3.5 lakh active clients and daily average turnover of Rs. 1,700 crore. Excerpts:
Do you think the 3.5 per cent fiscal deficit target set by the government for the next fiscal is credible?
I think we are used to second-guessing the government about the fiscal target, but over the past two years, we’ve seen the finance minister stick to his fiscal deficit number. With the previous governments, we had a problem with credibility and the markets questioned this credibility. I don’t want to approach even this year with a negative intent. Having said that, the government has accounted for a higher direct tax number next year, which is dependent on corporate profitability growing.
Which are the sectors that interest you now?
For those with a long-term orientation, this is an opportunity to buy. We think private banks, NBFCs will benefit from an interest rate decline. Some commodity users will continue to do better, such as Pidilite and paint companies; pharma will also do better. In consumables, we think Britannia is a good call.
Why would Britannia’s profitability reduce when wheat prices have gone down?
If business performance is not impacted but the stock price is going down, it’s time to buy. We are advising our clients to stay away from PSU banks. Let them settle down, we don’t know how much more struggle there is in this sector. We’re telling clients to let the uncertainty play out and wait till we see some sense of light at the end of the tunnel.
It’s okay to miss the first 5-10 per cent after the stock starts to rally because there’s a very high risk at this level.
We are also staying away from government sectors, from infrastructure a bit, and from oil.
