Any changes to capital gains tax in Budget will be a disappointment for market: Sandip Sabharwal

Do you think that it is going to be a tough fight for the bulls today?
I think given that it has been a tough month for the bulls till now in January so I would think that the market is going in very light. There is very less positivity so I would not be too let us say afraid or scared of the Budget. I do not think people should be scared of the Budget especially given the global context in which we are operating today.

Just wanted to get in your take as to what you are expecting if at all we were to see some tinkering on the tax front do you think that is going to be a huge disappointment from a market standpoint?
If they do something on capital gains tax it will be a disappointment because they do not need to do it and it will especially spoil the sentiments at a time when India has already been underperforming.

So I think if they do not do anything on capital gains that itself will be taken as positive. I think people will ignore everything else because ex of that Indian valuations have corrected, things are reasonable now and I would think that the markets are set for an up move ex of any capital gains move which could spoil sentiments in the near term.

In last one year, markets have seen no change. The difference is that in the run up to 2022 Budget the market expectations were extremely high. But now expectations, this time around are very low. And the levels have not changed at all. So can I say that this round, even though nothing has changed in terms of global environment and the positioning of the government, expectations is the lowest you have seen in a long time?
I completely agree with that. So as we know, market works from euphoria to despair. Similarly, the sentiments work from huge expectations to extremely low expectations. So I think this time there is fear what will the government do? Will it be totally socialist? Will it increase the capital gains tax? Will the structures change? So no one expects anything positive. So as far as my understanding goes, even if let us say hypothetically something negative comes, I think its impact will be limited to a few days. And on an overall basis, I think we are very well positioned as an economy so markets in my view in 2023 will do well irrespectively.

Now let us look at the Budget stocks. What we have done is that purely looked at 10 stocks, which in a sense really could be the budget theme, push on energy, push on infrastructure. , , L&T, , , that is the lot number one. Out of this lot, which to your mind could be the Budget stock?
I think from the previous wall, which we saw, I think L&T should do well because as it is, they are doing well and if at all, there will be positivity due to the Budget because the capex theme continues.

And in my view, the government should do something for consumption. Private sector capital investments has started so government does not need to support as it used to earlier but consumption has been hit by the high inflation. So they need to boost consumption. So the best way to do it is to reduce taxes, at least for the middle class. So if they do that, I think the consumption stocks will do well. So I think will do well.

Let us look at few more stocks. And these are 10 stocks, which we have identified, which at least we feel that there could be a little bit of Budget impetus. , the same logic applies if there is a change in income tax rebate. Mahindra & Mahindra again, the same logic applies. But and BOB, PSU banks if there is an incremental change in FPI limit, how positive that could be?
Given that these banks have already done well so now they need a boost in performance to do well. So if there are some changes incrementally, it could be better. But I think from these stocks my pick is M&M.

M&M I have held for a long time now. It is at all time high. It hit a all time high yesterday so I still believe that it gets advantage of a rural income resurgence. And from on top of that, it has got a very strong product profile, which is also futuristic and valuations are still not very expensive.

Anything else which is not part of the wall, which is part of your list?
I think government will do something on consumption. So to that extent, beaten down consumption names, which I would not buy earlier but which are down 30, 40% from the top. So let us say something like a

, the peak was 2300, today it is at 1500. So I think a lot of the decline in earnings, valuations have got corrected.

So I think that is something which I will be looking at. Then from the mid cap infrastructure theme, something like

, which has been doing well, but it is not as well recognized in terms of its valuation boost.

It still traded five, six times earnings so that could do well. And I think if something happens on the consumption side, we will see some of the durable names which have got beaten down could also come back something like a Voltas, Havells, which are down. Like

is down 40, 50% from the top, is down 30, 40%. So I think these are things which people should have a look at.