Interim Budget 2024: Announcements may feature measures with mass appeal, says Anuj Bajpai of Liquide

Anuj Bajpai, Founder & CEO, Liquide, believes that with general elections around the corner, the interim Budget may feature measures with mass appeal, such as tax reductions or subsidies. However, any major announcements in the interim Budget seem unlikely, he added. For 2024, Bajpai predicts that despite an overall positive outlook, it will be a year of volatility and has a target of 22,900 for year end.

Edited excerpts: What do you expect from the upcoming Budget? With general assembly elections around the corner, the interim Budget is expected to focus heavily on meeting its fiscal deficit targets and expenditure demands till the next government is elected. Finance Minister Nirmala Sitharaman has already indicated that the upcoming Budget will primarily focus on meeting government expenses until the formation of a new government.

So, any major announcements in the interim Budget seem unlikely. However, as GA elections are near, the Budget may feature measures with mass appeal, such as tax reductions or subsidies, and there could be opportunities to streamline tax brackets and rules for individual taxpayers. In terms of themes, we are looking at infra, power, banking, and auto with much zeal for the next year.

The same is reflected in the picks for our flagship “India Growth" basket. What is your Nifty 2024 target? Despite an overall positive outlook, 2024 looks to be a year of volatility with key events such as elections in India and the US, potential shifts in central banks' monetary policies, China's economic slowdown, and ongoing geopolitical tensions in various parts of the world.

Indian markets are currently expensive, limiting growth potential for the next year. Considering that positive cues are already reflected in these valuations, we anticipate a 6 8 percent increase in the NIFTY50 from its current levels. The technical analysis places the NIFTY50 target at about 22,650, while the Fibonacci extension on the weekly chart suggests a slightly higher target of around 22,900.

Will the mid and small cap rally continue? Last year, mid cap and small cap indices have significantly outperformed the large cap indices. While the NIFTY50 rose by 20 percent, the NIFTY Midcap 100 index grew by nearly 50 percent, and the NIFTY Smallcap 100 index increased even more, by 62 percent. As we look at 2024, the expectation is that midcaps and smallcaps will offer lower returns compared to their 2023 performance.

This shift may occur as valuations have significantly improved and traders potentially will start booking profits in these segments, moving their attention to undervalued stocks and sectors. We have therefore kept a sub 30% allocation to mid and small cap stocks across our actively managed Liquide stock baskets.

Apart from equities, which other asset classes should one invest in this year? Gold can be a good alternative for 2024 beyond equities given the commodity's bullish trajectory. Silver can provide an equally potent hedge if electoral uncertainty prevails in the year. Technical analysis using the Fibonacci extension indicates a potential rise of Gold to the 2,270 level next year.

What key trends one must look out for in 2024? Artificial Intelligence (AI) is a crucial trend to watch closely. Over 40% of Berkshire Hathaway’s investments are in AI or AI related firms at the moment. AI stood out as the most prominent technology investment trend in 2023 and is anticipated to continue drawing significant investments.

At Liquide, we have been doing groundbreaking work in terms of bringing cutting edge AI tools for our retail investors to automate research, analyse stocks, and cut down the complexity of the financial world. We firmly believe that in the next 5 years, 80 90% of investments will directly or indirectly depend on AI based insights.

Can you list some lessons investors should learn from 2023? It is crucial to stay disciplined. Investors must adhere to a well thought out and balanced investment plan, rather than making impulsive decisions based on short term market fluctuations. The recent short term slump in the market has proved how robust the Indian market is and how quickly it can recover.

Hence, we must not get swayed by market noise and focus on long term goals, diversify our investment strategy and match exposure to personal risk tolerance. Nifty has been hitting multiple record highs, do you believe its current valuations are fair? Currently, the NIFTY50 is trading above its 1 year average at around 22.7 times earnings, suggesting overvaluation and warrants caution, as the market may have priced itself well ahead of the curve.

It's important to temper return expectations for 2024 as they might not be as widespread or robust as in 2023. Yet equity returns could still be satisfactory and investors need not be deterred from looking at the current market highs. Factors like corporate earnings growth, inflation, and economic growth, along with the upcoming general elections, are crucial.

Is this the right point of entry for new investors? If not, till when should they wait? New investors might want to hold off on entering the market just yet, as a retracement in the Nifty is anticipated. This comes after a one sided rally where the immediate target of 21,500 has been met, following a surge past previous record highs.

A more opportune entry point could be around 20,300 20,500 levels, where investors can consider starting new positions. Nonetheless, even at these peak levels, investing in exchange traded Funds (ETFs) or diversified baskets is advisable rather than chasing individual stocks. The real key to successful investing lies in strategic portfolio diversification and choosing actively managed funds that employ adaptable strategies for reducing risk.

What themes will be in focus in 2024, given it's an election year? I think earnings growth will be led by the Banking, Infrastructure and Automotive sectors. What risks do you see in 2024, that may lead to weak performance? Looking to 2024, there's optimism due to expected milder inflation and easing interest rates.

However, the impacts of aggressive monetary policies might be underestimated, and overvaluation in the US market could mean a significant correction, affecting global markets, including India. Therefore, while the medium to long term outlook for Indian equities remains positive, investors should temper their return expectations for 2024.

A critical factor in the 2024 general elections will be the effectiveness of the opposition alliance, I.N.D.I.A., in establishing a strong seat sharing strategy. This could polarise the election and make the results less predictable. Elections often lead to significant swings in the stock market. Traditionally, markets have preferred a stable political environment with a majority government, as this usually means fewer policy changes after the elections.

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