Daily Voice: Ashika Global's Amit Jain cautious about Nifty crossing 27,000 in 2025, even though India's fundamentals remain strong

I remember in my last interview on September 8 we were cautious on Indian stock market Nifty at 25,000 and pre-empted an early exit point in that euphoric market scenario. You will be surprised to know that since that exit point FII’s have sold almost Rs 2 lakh crore in last 5 months. Any investor who exited at that moment of time would have saved his portfolio deterioration today. Even today, I continue to hold my cautious point of view on the Global Stock Market at least till March 31, 2025.

I see several risks that could disrupt the equity markets in the short to medium term. Potentially, a US market correction is the key risk for the Global Stock Markets including India. Even if the DII’s continue to buy the Indian Equities but contrarian FII’s selling will limit the upside. The market has already priced in an earnings recovery in Q2 of FY26, so any negative surprises could be severely punished by the market. Overheated small and mid-caps are also vulnerable to corrections if earnings disappoint.

While India's fundamentals remain strong, I'm cautious about the Nifty crossing 27,000 this year. These risk factors warrant a period of consolidation and increased volatility. We are suggesting our clients to adopt a well-diversified asset class strategy and remain vigilant amidst market complexities.

Most experts are limiting the number of rate cuts to two for the current calendar year. Do you agree? And is there any possibility of the RBI implementing 3-4 rate cuts this year?

On February 7, the RBI has cut rates by 25 basis point which is the first rate cut in the last 5 years, to give a booster dose for ongoing slow down in the Indian Economy. While RBI rate cut signals easing of liquidity but expecting 3-4 rate cuts in this calendar year of 2025 is too ambitious. More rate cuts are plausible, but RBI will likely to proceed cautiously based on data and wider economic factors.

Is the RBI shifting its focus and allowing the rupee to depreciate against the US dollar now? Do you think the rupee could fall below 90 against the US dollar this year?

Yes, it appears the RBI has shifted its strategy and is now allowing the rupee to depreciate to some extent in line with global currency market trends. This marks a departure from its previous stance of tightly managing the rupee to curb sharp declines. The RBI's reduced intervention suggests an increased tolerance for rupee depreciation, aligning it with the global currency market forces and easing pressure on India’s forex reserves.

New RBI governor Sanjay Malhotra seems to be comfortable with some rupee depreciation, especially given reduced inflation risks, domestic liquidity challenges, and the loss of export competitiveness from the rupee's past strength.

Whether the rupee could fall below 90 against the US dollar this year is difficult to say with certainty however, I expect the rupee to depreciate further to around 89 per dollar by March 2025.

After the measures taken by the government in the Union Budget and by the RBI, do you expect India to achieve the upper end of the growth forecast range (6.3-6.8%) mentioned in the Economic Survey, despite the Trump factor?

The measures outlined in Union Budget 2025 and the recent RBI policy adjustments aim to bolster economic growth. The Economic Survey projects a GDP growth of 6.3-6.8% for FY26. The RBI also forecasts GDP growth at 6.7% for FY26. Other organizations like the World Bank and IMF have similar projections. However, achieving the upper end of that range (6.8%) in the face of potential Trump-induced trade tensions presents a significant challenge.

While the budget focuses on tax cuts and infrastructure spending, and the RBI has eased monetary policy, these measures may not be enough to fully offset the negative impact of widespread tariffs. Uncertainty in global trade policies poses risks to the world economic outlook. For India to achieve its stated goal of Viksit Bharat by 2047, the economy will need to grow at the rate of around 8 percent at constant prices, on an average, for about a decade or two.

Domestic growth levers will be more important than external ones in the coming years for the Indian economy. Therefore, while the government and RBI are taking steps to stimulate growth, achieving the high end of the forecast range will depend on managing domestic factors effectively and mitigating the negative effects of global trade uncertainties. Realistically, a growth rate in the middle of the projected range is more probable.

Which sectors would you consider adding to your portfolio after the Union Budget and RBI policy announcements?

Budget 2025 strategically positions several sectors for substantial growth. Agriculture and rural-focused industries along with Income Tax cuts are set to boost rural and urban income which will have a positive ripple effect on the FMCG and Automobile sector. The energy sector, especially renewable energy and electric vehicles (EVs), will likely experience growth due to higher incentives and proposed investments in EV-charging infrastructure.

Also, the financial sector is poised to gain from an increased limit of 100% foreign direct investment (FDI) in insurance and enhanced support for the corporate bond ecosystem. Additionally, the shipping industry will benefit from tax exemptions and a dedicated maritime development fund. These targeted fiscal measures collectively create a fertile ground for economic expansion across diverse sectors, making Budget 2025 a catalyst for broad-based growth.

Are you concerned about your investments and portfolio due to potential tariff actions by Donald Trump?

Trump's tariffs on major trading partners like China, Mexico, and Canada could lead to increased global macroeconomic uncertainty and risk-off sentiment in global markets. Supply chain disruptions could increase costs for Indian companies that rely on imported components. Furthermore, retaliatory measures could escalate the global trade war, affecting multiple industries and economies worldwide. A stronger dollar, triggered by these trade tensions, is also a risk for the Indian market, potentially prompting FIIs to continue selling Indian equities. Hence, we have moved 40% of our portfolio into Debt Instruments which we will deploy into Equities at appropriate entry points.

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