Domestic flows will sustain over the coming years & therefore the relevance of FII flows will actually reduce. In past 2 years the domestic funds have outstripped FII flows and that has not happened over last 2 decades.
The WOW factor in this budget is Govt.’s commitment to reduce debt-to-GDP ratio from 68% to 60%. It sets stage for some significant fiscal consolidation over next 4-5 years something which future Govt.’s will not be able to renege on so easily because the fiscal math is sometimes subject to manipulation. It is very hard to actually fudge the debt to GDP number
The tax breaks for SME sector combined with boost for mass housing will accelerate employment in the coming months. This supports the economy which is actually recovering quite nicely.
We are coming to an end of rate cut cycle; the inflation has more or less bottomed out, global growth is accelerating & the Fed is likely to hike rates. In that back drop it is hard to cut rates. It also signifies that India’s growth is stabilizing and improving.
Materials will go from loss making to profit making and it will take care of all the slowdown that has happened in the IT space. There is structural depression in the earnings of IT companies which is going to last for 5-7 years. Pharma is more idiosyncratic; some companies will manage to grow because of the available opportunities. Overall, it is the material sector that will drive the performance for Nifty.