RBI governor Sanjay Malhotra is pro-growth and with inflation largely under control, the likelihood of another rate cut remains on the cards, Swati Khemani, founder & CEO of Carnelian Asset Management & Advisors, told Moneycontrol.
At Carnelian, they don't believe Trump's tariff policies will significantly change the RBI’s approach.
Among sectors, Carnelian continues to be bullish on BFSI, driven by increasing credit growth, and is also positive on manufacturing, supported by a revival in private capex, Swati said.
Do you expect the earnings outlook to improve from Q2FY26 onward, following a mixed performance in Q1FY26?
Yes, we believe the earnings outlook should improve in the second half of the year. We may see positive surprises in both earnings and topline growth. With improving liquidity in the economy, we expect its impact to be visible over the next couple of quarters. So far, Q1 results have largely in line with street expectations.
Do you think the RBI will wait for a few more months of economic data, the full transmission of previous rate cuts, and clarity on Trump’s tariff actions before making its next rate cut decision?
Our new governor is pro-growth, and with inflation largely under control, the likelihood of another rate cut remains very much on cards. We don't believe Trump's tariff policies will significantly change the RBI’s approach.
Do you foresee a significant impact on the Indian economy due to Trump’s tariff threats?
It depends on how the tariff negotiations evolve between the two countries. We expect both sides to eventually reach a mutually beneficial trade resolution. It’s clear that the US is pressuring India over crude/defense purchases from Russia, but our government remains firm on prioritizing national interest. India will continue to pursue policies that are economically favourable and strategically sound.
Which sectors would you consider accumulating during the current market correction?
We remain structurally bullish on India as a market considering strong domestic economy and advantageous position in comparison to other economies in the backdrops of tariffs levied by Trump Administration.
We continue to be bullish on BFSI, driven by increasing credit growth. We are also positive on manufacturing, supported by a revival in private capex, and on the pharma and specialty chemical sectors, which are poised to benefit from global supply chain shifts and trade realignments. These sectors are structurally strong and relatively insulated from trade war risks.
What are the key triggers that could drive a revival in market sentiment going forward?
A revival in market sentiment will likely be driven by a combination of domestic and global triggers. Domestically, sustained earnings growth, continued moderation in inflation, and potential rate cuts by the RBI will be key.
A pickup in private capex and improvement in rural demand will also aid sentiment. Globally, stability in US monetary policy, resolution of trade tensions, will play a crucial role. Overall, a more stable macroeconomic environment and consistent policy support could act as strong tailwinds for equity markets.
Do you believe a US recession is unlikely, despite recent signs of weakening economic data?
It's difficult to predict with certainty. While the US has shown some signs of weakening economic data in jobs, the recent quarter still reflected good growth. Mr. Trump is keen on lowering interest rates due to the large debt servicing burden, but the Fed remains cautious as inflation is not yet under control. The ongoing tension between fiscal and monetary authorities adds to the uncertainty.
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