Divam Sharma, the co-founder and fund manager at Green Portfolio PMS, sees a strong chance of a 25-bp cut. "Inflation is reasonably under control, and a measured cut would support growth without jeopardizing financial stability," he said in an interview to Moneycontrol.
According to him, banks look attractive, valuations are reasonable, and rising credit cycles should benefit them but NBFCs offer a compelling growth lever.
In case of GDP, he is also bullish on the second half of FY26, expecting momentum to pick up as demand strengthens further.
Do you see the possibility of a repo rate cut by the RBI in its December meeting?
Yes, we see a strong chance of a 25-bp cut. Inflation is reasonably under control, and the RBI is likely waiting for further clarity before easing again aggressively. A measured cut would support growth without jeopardizing financial stability.
Are you more constructive on banks or NBFCs?
We are optimistic about both, but especially NBFCs. Fundamentals are improving: credit demand is strengthening, asset quality is stabilising, and many NBFCs remain well capitalised.
Banks, too, look attractive, valuations are reasonable, and rising credit cycles should benefit them but NBFCs offer a compelling growth lever. GST rationalisation and increased credit borrowing in the upcoming festive season is going to boost the growth.
Do you expect the GDP numbers for Q2 FY26 to be around 7.5 percent?
We think 7.5 percent is on the higher side, but growth could still be very healthy.
According to polls, estimates cluster around 7.0 -- 7.75 percent. More conservative forecasters like Ind-Ra expect ~7.2 percent for Q2, driven largely by private consumption and government capex. That said, we are bullish on the second half of FY26, expecting momentum to pick up as demand strengthens further.
Do you think a Fed rate cut in December looks uncertain given the labour market slowdown and weak economic data?
It’s plausible but not certain. On one hand, the US labour market is cooling, and inflation appears to be nearing the Fed’s target, giving room for a 25-bp cut. On the other hand, some hesitation has crept in, markets are now pricing the odds of a December cut at only ~33 percent per recent reports. Also, some Fed officials want to proceed cautiously, wary of sticky inflation.
Are you cautiously optimistic on equities considering the current market dynamics?
Yes, cautiously optimistic is our stance. Many of the current headwinds e.g., global uncertainty, rate concerns are already priced in. Looking ahead, improved FII flows, liquidity support from global central banks, and a potential reallocation to emerging markets could benefit India. Domestic consumption tailwinds especially from rural and middle-income segments further strengthen our conviction.
Are you confident that earnings growth will be stronger in Q3 compared to Q2?
We are confident about stronger earnings in Q3 and Q4. By that period, the impact of the recent tariff shock is expected to moderate, allowing businesses to stabilise. Additionally, GST rationalisation and rate adjustments should stimulate demand across key sectors.
Rural growth and domestic consumption are also likely to remain robust, providing a solid boost to revenue, particularly for consumer-facing industries. Furthermore, both corporate and government-led capital expenditure are expected to filter through, supporting momentum in investment-linked sectors and contributing to overall earnings strength.
What could be the triggers that may strengthen the rupee in the coming year?
Key triggers that could support the rupee include higher FII inflows as global liquidity improves and investors renew their focus on India. Strengthening exports, particularly from IT and other high-value service sectors, are likely to enhance foreign exchange earnings as well.
Additionally, increased remittances and investments from NRIs, driven by India’s attractive growth prospects, could further bolster the currency. Favourable domestic macroeconomic conditions, including controlled inflation and stable growth, would also play an important role in reducing external vulnerabilities and supporting the rupee’s stability.
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.
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