Daily Voice: AI's impact on hiring could pose long-term challenges for jobs creation and economic growth, says Marcellus' Arindam

Do you see the US Federal Reserve continuing with monetary easing in the next two policy meetings as well?

The committee is likely to stay in easing mode, but the path is data dependent. One more 25 bps cut over the next two meetings is probably a reasonable base case, with another cut possible if core services inflation keeps easing and the labour market softens further.

It is worth keeping an eye on core PCE running below a 2.5 percent annualized pace on the three-month measure and on unemployment drifting a couple of tenths higher before the Fed delivers a second move. If growth stabilizes and inflation progress stalls, they are more likely to pause.

Do you expect a robust market rally — possibly a new record high — if the US–India tariff issue is resolved?

It would remove a headline risk and lower the risk premium. The biggest winners would likely be export-exposed pockets in autos, chemicals, textiles, and renewables. A durable move to new highs would still need support from earnings revisions and global rates rather than tariffs alone.

Do you believe FIIs will return to India soon, even if there is no resolution to the India–US trade issue?

They can still return. Flows are sensitive to US real yields, the dollar, and earnings visibility. If yields drift lower and India’s earnings hold up, FIIs tend to re-engage even with unresolved trade issues. The mix may skew toward quality, liquid names rather than a broad beta chase. India is viewed very favourably as a long-term opportunity, but valuation and the earnings slowdown have been points of worry. If either of those improves, we may see interest return.

After lagging significantly through the year versus other emerging markets, India’s large-cap valuation premium compared to emerging markets is now closer to in line with its historical premium.

Do you expect nominal growth to pick up significantly from next year onward?

It is probably fair to expect a pickup, helped if and when targeted GST cuts come through. Moving items from 18 percent to 12 percent lowers shelf prices by a mid-single-digit percentage. With short-run price elasticity in the 0.5 to 1.5 range, volumes can get a low- to mid-single-digit boost. Smaller trims of 2 to 4 percentage points imply low-single-digit lower prices and roughly low-single-digit higher volumes. That can add a modest 30–40 bps to private consumption growth in the near term.

The long-term challenge is jobs. To turn a demand pop into sustained growth, we need broad-based job creation, which may face added pressure as AI changes hiring patterns in some services. Placement season on campuses has started on a positive note, but the main task remains creating more and better jobs.

Do you see a bubble forming in US AI stocks?

The stress point is monetization of the enormous investments that has been committed and made. Cash burn is elevated because capacity expansion is aggressive, and in the rush to scale some players appear to be overlooking unit economics. Competition is rising from legacy vendors, custom ASICs, and Chinese chip manufacturers. In a few segments those risks look under-discounted.

The counterpoint is that AI is one of the few areas still delivering solid earnings growth and relative stability. Unless earnings breadth improves elsewhere, that leadership can persist, but my sense is we are past mid-cycle rather than early. We stay selective and prefer businesses that show cash conversion, pricing power, and capital discipline.

Do you expect the RBI’s recent measures to lead to higher credit growth over the next six months? Are you overweight on the banking sector as a whole?

Easier liquidity and transmission should trim funding costs by tens of basis points and support activity, but six months is a short window. It is reasonable to expect system credit to run in the low- to mid-teens year-on-year, with mortgages and better-quality corporate books leading.

The measures could add on the order of low single digit percentage points annualized to credit growth over that period. We are selective rather than overweight the whole sector, with a bias toward lenders that have strong deposit franchises, conservative underwriting, and consistent operating discipline.

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