Prashant Jain praises the Indian economy and the budget. He believes the budget has provided good support for PSU stocks and key sectors like capex, infrastructure, railways, defence, and Make in India. Despite weak exports and tightening money conditions, the economy remains strong. Jain suggests that large banks and NBFCs focused on project finance will have good growth opportunities. He also mentions that power demand in India will increase, although the power sector has already rerated and may pause in rerating.
Prashant Jain, Founder, 3P Investment Managers, says “there are absolutely no surprises in this budget. This is a very good Budget in my opinion. The bulk of the policy reforms, big changes are behind us. So, no change is good. The Indian economy is doing extremely well despite a few headwinds that it has been facing. Fiscal deficit is steadily coming down and it is a headwind for growth. Despite that, we continue to grow well.”
Your firm’s name is 3P, but everybody’s added a fourth P to it because you have invested in PSU stocks. So has the Budget done enough to ensure that the fourth P of your investing, which is PSU stocks, are taken care of?
Prashant Jain: PSUs are represented in core sectors of the economy and greater focus on capex, infrastructure, railways, defence and Make in India, are good for PSUs and there are absolutely no surprises in this budget. This is a very good Budget in my opinion. The bulk of the policy reforms, big changes are behind us. So, no change is good.
The Indian economy is doing extremely well despite a few headwinds that it has been facing. Fiscal deficit is steadily coming down and it is a headwind for growth. Despite that, we continue to grow well. Exports have been weak and money conditions have been somewhat tighter. Even the external capital flows, because of tighter liquidity conditions outside India, we have seen a softening. So despite the economy doing well, it suggests that we are now indeed in a very good shape and on a good wicket, yes.
What about any picks in this market?
Prashant Jain: I think these are fairly valued markets and I do not see any low-hanging fruit to be very honest. You know the multiples at which these markets are trading. I still think banks that have lagged should do well in this cycle because balance sheets are healthy. Credit should pick up. So I would prefer largecaps and banks.
What do you think will come out of it, apart from PSUs?
Prashant Jain: As I said earlier, I think India’s capital formation is growing faster than consumption and which is good for us. That is a sustainable way to grow. Large banks have lagged in India and they will do well. Given the last NPA cycle in corporates, banks have defocused on project finance. That is a space that will grow in any institution. For any bank or NBFC that focuses on that space, there should be very good growth opportunity. I would favour large banks and NBFCs, focused on funding capex in India.
Another P to your firm’s name is power, the fifth P. So, three Ps which represent your firm are patience, prudence, perseverance; then it is PSUs and power.
Prashant Jain: The power space will grow for sure. Power demand in India should accelerate. As incomes grow, as electrification takes place, even AI will consume a bit of power. But we must appreciate that this is a business with fairly controlled ROEs. And the sector has rerated. It is not expensive but I would expect the rerating to take a pause. Compounding returns should continue in this. And that is why I did not mention this.
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