HomeMarket NewsEnvision's Nilesh Shah sees no risk to government capex spending or signs of growth tapering
Envision's Nilesh Shah sees no risk to government capex spending or signs of growth tapering
Shah believes that from an economic and overall business environment point of view, the next five years will essentially be the continuation of the policies and the focus on growth seen over the last many years.
The underlying theme in the market right now is policy continuity and this, says Nilesh Shah of Envision Capital means a continued focus on economic growth with a tinge of fiscal consolidation. "So, you're going to see a continued period of macroeconomic stability and this is what the market wants."
In a chat with CNBC-TV18, Shah said he sees no risks to government's capital expenditure. He also listed the sectors investors can bet on now.
This is the verbatim transcript of the interview.
Q: Cut-paste Council of Ministers list, at least as far as the key offices are concerned. The market has already bought the dips but do you expect things to pick up from here on?
A: Yes, I think so. If you look at essentially the list of ministers, one thing is for sure there is going to be continuity. That's essentially the underlying trend, the underlying theme, that we are going to see essentially continuity of what we have seen for the previous five years or maybe over the last 10 years.
What this implies is a continued focus on economic growth with essentially a tinge of fiscal consolidation. So you're going to see a continued period of macroeconomic stability. And this is what markets want. This is what investors will be looking forward to. So to that extent, I clearly believe that the next five years from an economic point of view and from an overall business environment point of view, it will essentially be the continuation of the policies and the focus on growth that we have seen over the last many years.
Q: Ashwini Vaishnaw has got a lot of portfolios, he's got railways, MEITY and information and Broadcasting (I&B). What do you read from this? Do you think the railway stocks are worth betting on? Do you think it will not be all as populist as was expected - the big expectation was railways will go to maybe Janata Dal (United) (JD(U)), maybe Nitish Kumar's party. What do you make of this particular sector?
A: It continued to kind of show interest in the railway space. Clearly, that's been a top priority of the government over the last three to four years, especially in the post-COVID era, we've clearly seen a huge focus on railways. Many years back, it was clearly the roads, which was essentially the very big focus of the previous governments or the previous tenure of this government. But clearly, over the last three to four years, it's railways, which has essentially become the centre of focus.
Also Read | Multibagger railway stock jumps 8% as Morgan Stanley initiates coverage with an 'overweight' call
Clearly, lots has happened, many new initiatives, huge progress, huge development there. There's a huge thrust on introducing new trains, faster trains, there's a massive overhaul, and the stations are getting modernized. So I clearly believe it's been so far a period of expansion, innovation and modernization as far as Indian Railways is concerned. And I think it's very heartening to know that we still continue to have Ashwini Vaishnaw as the Minister for Railways. And that I think augurs well for the rail sector as a whole.
Coming down to individual investment opportunities. Of course, as investors, we will obviously have to be focused on the kind of multiples that we pay for these stocks. But I still believe overall, the tailwinds for the sector continue and continue unabated.
A: We have probably got the best man for the position, the most experienced, I would probably call him the veteran of the space. So to that extent, again, that continues to be an excellent choice. And the fact that the Prime Minister has chosen to kind of maintain continuity, again, bodes well for roads as a sector. And therefore, it means continued expansion of the road network. It means more demand for construction services, more demand for construction equipment, more demand for construction materials. So I clearly believe that the overall sector is very favourably poised for a period of extended and continued growth for a few more years. So to that extent, again, it is a great decision. And I think that means we'll continue to see better prospects for the sector.
Also Read | Union Cabinet clears way for building 3 crore houses under PMAY
On the whole, if we were to combine both railways and roads, clearly, what it signals is a continued priority for infrastructure growth, infrastructure building, and ensuring that India has the world-class infrastructure to support our manufacturing and other businesses and to make India way more competitive as a manufacturing business and investment destination.
Q: True, when have we last had 3.3% of gross domestic product (GDP) as investment in capex. Revenue expenditure has always been a giant absorber of government revenues. Do you think that gets affected? I'm asking you only because the first two files signed were PM-Kisan Samman Nidhi and PM Awas Yojana. To be fair, both are existing programs and money had to be dispersed. For two months, nobody had signed anything. Maybe it was just that, but isn't it symbolic? And therefore, do you expect more welfare and perhaps something taken out of capex?
A: I expect the welfare programs to continue.
Q: Not increase?
A: There can be an increase and that would essentially be a function of economic growth and tax collections. I think both of these essentially will define the denominator and essentially the denominator becomes the base and if the denominator and the base keep expanding, you would see increased outlays also going into welfare. But I still believe that as a percentage, it will continue to be way more measured the way it has been in the past. Despite very difficult situations, I think that piece got managed well in terms of the allocations and especially as a percentage of GDP, which ultimately has resulted in a declining fiscal deficit.
Also Read | What transpired at Modi 3.0's first cabinet meeting
So to that extent, we must give it and we must concede it to this government, that they have been way more balanced in terms of the fiscal responsibilities. And I believe that that mantra or that priority will continue for the rest of the tenure.
Q: So no danger to capex or deficit?
A: No, I don't think so. I still think that both will continue to be the two pillars of government spending. And I think the government is extremely cognizant of that. And it has already shown it in terms of its past actions. So to that extent, I would again think that even on these fronts, be it allocation to infrastructure or be it allocation to welfare programs, I would still think that the government will continue to demonstrate equanimity rather than just going overboard in either direction.
For more, watch the accompanying video
In a chat with CNBC-TV18, Shah said he sees no risks to government's capital expenditure. He also listed the sectors investors can bet on now.
This is the verbatim transcript of the interview.
Q: Cut-paste Council of Ministers list, at least as far as the key offices are concerned. The market has already bought the dips but do you expect things to pick up from here on?
A: Yes, I think so. If you look at essentially the list of ministers, one thing is for sure there is going to be continuity. That's essentially the underlying trend, the underlying theme, that we are going to see essentially continuity of what we have seen for the previous five years or maybe over the last 10 years.
What this implies is a continued focus on economic growth with essentially a tinge of fiscal consolidation. So you're going to see a continued period of macroeconomic stability. And this is what markets want. This is what investors will be looking forward to. So to that extent, I clearly believe that the next five years from an economic point of view and from an overall business environment point of view, it will essentially be the continuation of the policies and the focus on growth that we have seen over the last many years.
Q: Ashwini Vaishnaw has got a lot of portfolios, he's got railways, MEITY and information and Broadcasting (I&B). What do you read from this? Do you think the railway stocks are worth betting on? Do you think it will not be all as populist as was expected - the big expectation was railways will go to maybe Janata Dal (United) (JD(U)), maybe Nitish Kumar's party. What do you make of this particular sector?
A: It continued to kind of show interest in the railway space. Clearly, that's been a top priority of the government over the last three to four years, especially in the post-COVID era, we've clearly seen a huge focus on railways. Many years back, it was clearly the roads, which was essentially the very big focus of the previous governments or the previous tenure of this government. But clearly, over the last three to four years, it's railways, which has essentially become the centre of focus.
Also Read | Multibagger railway stock jumps 8% as Morgan Stanley initiates coverage with an 'overweight' call
Clearly, lots has happened, many new initiatives, huge progress, huge development there. There's a huge thrust on introducing new trains, faster trains, there's a massive overhaul, and the stations are getting modernized. So I clearly believe it's been so far a period of expansion, innovation and modernization as far as Indian Railways is concerned. And I think it's very heartening to know that we still continue to have Ashwini Vaishnaw as the Minister for Railways. And that I think augurs well for the rail sector as a whole.
Coming down to individual investment opportunities. Of course, as investors, we will obviously have to be focused on the kind of multiples that we pay for these stocks. But I still believe overall, the tailwinds for the sector continue and continue unabated.
Q: The only other specific sector, is roads, again, there was an expectation that the allies would stake their claim, but the expert has returned back in roads, Nitin Gadkari. Does that mean anything in terms of road construction, capex, and cement stocks? How would you approach as a stock investor?
A: We have probably got the best man for the position, the most experienced, I would probably call him the veteran of the space. So to that extent, again, that continues to be an excellent choice. And the fact that the Prime Minister has chosen to kind of maintain continuity, again, bodes well for roads as a sector. And therefore, it means continued expansion of the road network. It means more demand for construction services, more demand for construction equipment, more demand for construction materials. So I clearly believe that the overall sector is very favourably poised for a period of extended and continued growth for a few more years. So to that extent, again, it is a great decision. And I think that means we'll continue to see better prospects for the sector.
Also Read | Union Cabinet clears way for building 3 crore houses under PMAY
On the whole, if we were to combine both railways and roads, clearly, what it signals is a continued priority for infrastructure growth, infrastructure building, and ensuring that India has the world-class infrastructure to support our manufacturing and other businesses and to make India way more competitive as a manufacturing business and investment destination.
Q: True, when have we last had 3.3% of gross domestic product (GDP) as investment in capex. Revenue expenditure has always been a giant absorber of government revenues. Do you think that gets affected? I'm asking you only because the first two files signed were PM-Kisan Samman Nidhi and PM Awas Yojana. To be fair, both are existing programs and money had to be dispersed. For two months, nobody had signed anything. Maybe it was just that, but isn't it symbolic? And therefore, do you expect more welfare and perhaps something taken out of capex?
A: I expect the welfare programs to continue.
Q: Not increase?
A: There can be an increase and that would essentially be a function of economic growth and tax collections. I think both of these essentially will define the denominator and essentially the denominator becomes the base and if the denominator and the base keep expanding, you would see increased outlays also going into welfare. But I still believe that as a percentage, it will continue to be way more measured the way it has been in the past. Despite very difficult situations, I think that piece got managed well in terms of the allocations and especially as a percentage of GDP, which ultimately has resulted in a declining fiscal deficit.
Also Read | What transpired at Modi 3.0's first cabinet meeting
So to that extent, we must give it and we must concede it to this government, that they have been way more balanced in terms of the fiscal responsibilities. And I believe that that mantra or that priority will continue for the rest of the tenure.
Q: So no danger to capex or deficit?
A: No, I don't think so. I still think that both will continue to be the two pillars of government spending. And I think the government is extremely cognizant of that. And it has already shown it in terms of its past actions. So to that extent, I would again think that even on these fronts, be it allocation to infrastructure or be it allocation to welfare programs, I would still think that the government will continue to demonstrate equanimity rather than just going overboard in either direction.
For more, watch the accompanying video
(Edited by : Shweta Mungre)
First Published: Jun 11, 2024 6:40 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
