Budget 2018: Don't expect big bang reforms; rural, cement themes a play, says Sundaram MF

The overall market is factoring in a lot of positive news, said S Krishna Kumar. Cues such as India being fastest-growing economy going ahead along with swelling order books of EPC firms are working well.

   

While the Street gears up for the Union Budget 2018, Sundaram Mutual Fund does not expect big bang reforms.

Clearly, in the last year of its term, the government would like to consolidate on major steps taken than opening up of any new front. Steps could be taken to progress things that have been done in the past few years. He expects the government to stay on course with fiscal (discipline) and allocate to schemes on rural development and job generation.

Meanwhile, the overall market is factoring in a lot of positive news. Cues such as India being fastest-growing economy going ahead along with swelling order books of EPC firms are working well.

Speaking on the December quarter performance, Kumar said investors were factoring in 12-15 percent growth in this quarter and probably higher in the next one. With high PE multiple, one could probably play earnings growth, which will drive returns, he told the channel.

Kumar expects crude prices to soften in one month and sees it back to levels of around USD 60, which is one of the bases. So, crude-driven inflation will come back down, while CPI too could cool off as the current price surge was seasonal, he observed.

So, is there a rural theme to be played in the run up to the Budget? Kumar said it has been broadly playing the theme in the past couple of years. “We have increased allocation towards the rural theme in the last two years. Agro chemicals, sugar, tea and tractors are parts of the portfolio.

Among other sectors, he expects a strong performance from cement sector as costs come under control and margin expansion takes place. He is upbeat on South India-based cement companies as they come out of a multi-year soft cycle.

In the auto space, he believes auto ancillaries have come of age and are serious players in the global value chain.

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