Budget 2024: Allocation to gold, 10-20% cash to buy on dips - smallcase managers reveal portfolio strategy for budget

The upcoming Union Budget 2024 is expected to be fiscally prudent yet expansionary with continuation of the earlier policies of the NDA government, according to a survey conducted with over 50 smallcase managers.

A study conducted by investment platform smallcase reveals that over 80% of smallcase managers expect a hike in India’s planned capex spending and more budgetary allocations in areas like Infrastructure, Power, Railways and Defence.

Over 90% of the smallcase managers in the study have predicted some near-term volatility in the stock market around the budget, though the recommendation is to look at it as a buying opportunity with a long-term horizon. The smallcase managers expect Nifty to reach 25,000 levels and Sensex near 90,000 by the year end.

“The Union Budget will impact the different themes and strategies that retail investors are taking exposure to via multiple smallcases on the platform,” said Vasanth Kamath, Founder and CEO, smallcase.

Here are key budget expectations and stock market strategy ahead of the Budget as per smallcase.

Budget Expectations

The smallcase managers foresee more hikes in India's planned capex spending. To stimulate growth in an economy aspiring to become the world's third-largest by 2030, smallcase managers predict more budgetary allocations in areas like Infra, Power, Railways & Defence. Discretionary consumption is already doing well, some focus in the budget can be expected to boost rural consumption in a sustainable manner.

Fiscal deficit target: smallcase managers believe that the fiscal deficit target will be further reduced below 5% in the upcoming budget, boosted by the Reserve Bank of India's substantial dividend of ₹2.11 lakh crore.

They expect a revision of 100 basis points if the Finance Minister Nirmala Sitharaman is looking at the goal of reducing the fiscal deficit to 4.5% by 2026. While they expect GST collection to deepen and improve further due to better economy and compliance, they believe Direct tax collections can grow significantly as corporate profits rise and TDS collections increase.

GDP target for FY25: As per survey, smallcase managers expect the real GDP growth for FY25 to be in the 7-8% range with GDP crossing the $4 trillion mark.

Taxes: Over 60% of the smallcase managers don't foresee any notable changes in taxes in the upcoming budget.

Sectors in Focus: As per smallcase managers, Infrastructure, Power, Defence and Manufacturing sectors will be in focus in the upcoming budget. They believe that with a focus on sustainable developments, the budget may benefit the clean tech space. Overall, they see Infra, transportation, and real estate among the major growth areas.

Portfolio Strategy

Smallcase managers recommend investors to have a well-diversified portfolio, rebalancing periodically, with exposure in gold, silver and keeping cash for buying on dips.

A well-diversified portfolio allocating capital to companies where the growth rates are exponential due to tailwinds at reasonable prices, allocation to other asset classes like gold, silver and gilt, and keeping 10% - 20% cash in the portfolio for buying on dips, is ideal approach to combat any near-term volatility, they said.

The smallcase managers recommend investors to not speculate on any specific event but to allocate capital for the long term in smallcases with good growth opportunities and reasonable valuations.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.