Budget Non-Event, Markets Must Watch These Other Factors: JPMorgan's Sanjay Mookim

JPMorgan's Sanjay Mookim on budget, volatility, growth and more.

<div class="paragraphs"><p>A pedestrian walks past the Bombay Stock Exchange.&nbsp; (Photographer: Dhiraj Singh/Bloomberg)</p></div>
A pedestrian walks past the Bombay Stock Exchange.  (Photographer: Dhiraj Singh/Bloomberg)

Budget 2022 turned out to be a non-event for the Indian stock market and equities are volatile for a different set of reasons, according to Sanjay Mookim, India strategist and head of equity research at JPMorgan India Pvt.

The government's view has been clear that it's "growth supportive" and the market needs to keep an eye on economic activity, Fed tapering, and oil prices, Mookim, India strategist and head of equity research at JPMorgan India Pvt. told BloombergQuint's Niraj Shah in an interview.

The framework of Budget 2022 has been towards trying to get investment going and closing the output gap as soon as possible, he said. The government has done that at the cost of "printing a higher fiscal deficit number" and the policy choice is extremely clear on that, he said. Although, according to him, the deficit is likely to be lower than projected.

I have argued that the math clearly suggests that the government is likely to exceed the forecast revenue collection for FY22 and FY23 by a significantly large amount.
Sanjay Mookim, India Strategist and Head of Equity Research, JPMorgan India.

And while the budget focuses on infrastructure and construction, Mookim said there is a need to look at how long does the momentum in capex-driven sectors continues before debating whether it's enough or not. Such a spending push in the budget may help create demand for commodities related to infrastructure and construction activities, with positive corporate implications.

But the path to a cyclical recovery to kick requires a lot of favorable long-term dynamics and the consumer confidence story in India will take some time to come back, he said. It will probably take three to five quarters for consumer confidence to be "fixed" and that may elongate the process of economic recovery, he said.

Equity Market Outlook

The equity market needs to worry about Fed tightening the liquidity. "The problem is that the automatic upgrade cycle that we saw last year is over and that the equity market is now catching up with the base effects of the pandemic," he said, referring to an unprecedented rebound from the lows of March 2020.

A few large caps and capex-driven companies may still be able to deliver growth but the consumption-driven plays may suffer a bit till the consumer confidence revival takes place, Mookim said.

Watch the full conversation here: