Investors should not have high hopes from the upcoming Budget given the challenges the NDA government is facing, according to Pankaj Sharma, Head of Equities, Equirus Securities — a leading institutional broking firm. A long-term investor can look at recent corrections as entry points, he said. Britannia, Torrent Power, Infosys, Reliance Industries and Coal India are his top picks. Excerpts:

Which do you think is more important in terms of impact on global markets — US or China?

From the global perspective, both the US and China are important. China, because we are seeing that the correlation of commodities with China is higher.

And the US, because rate hikes would have a bearing on the performance of emerging markets. I think Fed would hike rates at least once or at the maximum, twice this year.

India’s fundamentals have not got better as was perceived earlier and valuation premium has come off. Your comments.

The linkage of performance of the local markets with factors, such as rise or fall in crude prices, worries or stimulus in Europe and possibility of a soft or hard landing in China, is unlikely to weaken in the short term.

The valuation and premium of the Indian markets have come off due to disappointments on the slow pace of improvements locally and reforms being slower than expected by most investors in the last two years.

India may be a better emerging market but we are certainly not cheap on a comparable basis.

Going ahead, every time there is carnage globally, will India see equal reaction or will the

correlation reduce?

India cannot break away from the EMs so easily in the minds of foreign investors. The attractiveness of equities in emerging markets as an asset class has been impacted significantly. We don’t think that this correlation will reduce in the near term.

What are your expectations from the Union Budget?

Budget 2016 will not be an easy task for the NDA government. Overall, it is likely to be a ‘The Middle Path’ Budget. Three key themes we expect to see in the Budget are: don’t expect too much generosity on the tax front, more money in the hands of rural households and public capex.

How much can the market correct if the Budget disappoints even slightly? What will be those disappointing factors?

The expectations are not high from the Budget considering the challenges the government is facing. If the government goes very aggressive in spending and does not move decisively on reforms, it would be easily possible that the market corrects 2-3 per cent.

What should investors do — buy now/sell and enter later?

Our view is that you may get a better entry point. For a trader, it is better to not buy now. But, if an investor has two years plus horizon and expects 15-20 per cent return, this would be good time.

What is your comment on corporate performance in Q3?

Corporate India is not doing that great and many results were below estimates. This is especially disappointing when expectations have largely been muted. When do you see corporate recovery?

We were expecting recovery to begin by the end of FY16. Given the deteriorating performance of India on IIP and exports, this is certainly not a good sign for recovery hopes.

Which are your top stock picks?

Britannia, Torrent Power, Infosys, Reliance Industries and Coal India are my top picks.

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