Budget will be tough juggle; avoid realty

In this episode of CNBC-TV18's special series, Juggling Options experts deconstruct expectations from the upcoming Union Budget. Nirmal Jain of IIFL opines that the Budget will be a challenge of sorts for the finance minister and advises investors to stay away from realty stocks.

Also read: Nifty unlikely to fall below 5,800 before Budget: IL&FS

Below is an edited transcript of the interview on CNBC-TV18

Q: Firstly, what are your general expectations from the Budget this time around? Do you believe repeated assurances from the finance minister that the probability of a negative surprise is quite low?

A: The Budget this time is going to be quite a task because there are multiple challenges such as the fiscal deficit which finance minister has indicated that he will rein it at around 5.3 percent and target 4.8 percent next year.

The second challenge will be striking a balance between populist measures to please the masses and maintain the momentum on reforms to boost economic revival and reduce the pernicious impact of rising current account deficit, halt imports being funded by FII funds and make exports more competitive.  So I think it will be difficult not to expect any negative surprises from the Budget.

Q: What are the realty stocks that you would be looking at in the run-up to the Budget ?

A: This is a high beta sector. The sector has taken a beating which gives it room to run up on positive news. But from a long-term point of view, I would adivse investors to stay away.

If traders have to take exposure, then they could choose stocks that are relatively safer, maybe stocks like Godrej Properties or larger stocks like DLF where probably the company will raise equity money.

But from an investor's perspective of three-five years, real estate stocks have multiple risks and hurdles. One can invest in real estate as a part of asset allocation but the stocks are always risky. Having said that, there are some stocks that one can look at for exposure to the sector.

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