Consumption growth could be driver, but underlying drivers a concern: Utpal Sheth

Sheth said that the market rebound witnessed lately has been triggered by a rally in banks and financials, which are unaffected by the likely upheavals caused by changes in global trade.

India's consumption story could become a significant growth driver again, but only if it’s underlying fundamentals, especially income and employment, start showing stronger signs of recovery, market veteran Utpal Sheth said in a conversation with N Mahalakshmi on The Wealth Formula podcast.

“Last few years we've had a reasonably unexciting consumption growth picture in India. Consumption could well be a very strong possibility,” he said. However, he added that there are concerns about the actual enablers of consumption growth: “But what are the underlying drivers for that consumption to grow? Are real incomes increasing? We are not seeing that yet,” he said.

A key engine of past consumption booms was employment in the technology sector. “Over the last 30 years, the largest consumption driver has been the job creation by the IT sector. We are not seeing that, right?” he added, “We were seeing growth at the higher end of the consumption buckets. Will that continue? Probably,” he said.

Watch the full interview here.

Sheth said that the market rebound witnessed lately has been triggered by a rally in banks and financials, which are unaffected by the likely upheavals caused by changes in global trade. Earlier, markets were in need of a correction, and a significant portion of that correction is now done, he said. However, he added that while the market has recalibrated growth expectations, margin expectations have not yet been adjusted. These could be at risk in the wake of a potential global supply shock, as China—which constitutes 30–35% of global manufacturing capacity—will need to look at new destinations due to high U.S. tariffs, putting significant pressure on prices.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.