In the Union Budget 2025, announcements on capital expenditure, special incentives for sectors like renewables, infrastructure, and manufacturing and some tax relief for individuals could bolster market sentiment, said Abhijit Bhave, the Managing Director and CEO at Equirus Wealth in an interview to Moneycontrol.
According to him, the markets seem to have priced in certain risks, such as inflationary pressures and geopolitical tensions. However, the extent of global monetary tightening or unexpected fiscal slippages remains uncertain, he believes.
Further, he advised the market participants to keep a watch on the US bond yields as global markets are taking cues from it. "The sharp rising in yield to 4.75 percent is indicating that the markets expect Trump policies to be inflationary. Any cooling off here is likely lead to an emerging markets rally," said Bhave who has more than 25 years of experience in scaling up new wealth management ventures in India and abroad.
Do you expect dramatic changes in US tariff and immigration policy once Trump takes charge as US President next week?
While it’s too early to predict specifics, Trump’s administration is likely to prioritize "America First" policies, potentially revisiting trade deals, tariffs, and putting in place stricter immigration norms. Any significant changes in H1B visa policies or trade tariffs could impact Indian IT and export-driven sectors. However, India’s focus on diversifying export markets and enhancing domestic manufacturing capabilities could mitigate medium to long-term impact of possible US policy risks.
Do you believe the RBI will start its interest rate cut cycle in February? Are there any major reasons the RBI might not proceed with a rate cut in February?
The RBI is likely to evaluate multiple factors before initiating a rate cut. Factors like inflation trends, fiscal discipline reflected in the upcoming budget, and global monetary policies will play a critical role. A pause may be warranted if inflation remains sticky or fiscal deficit widens significantly. However, subdued growth data & easing inflation could prompt a dovish stance from the RBI.
What measures, if announced in the budget, could drive a rally in equity markets?
Announcements on capital expenditure, special incentives for sectors like renewables, infrastructure, and manufacturing and some tax relief for individuals could bolster market sentiment. Simplified regulations for startups and measures promoting financial inclusion and privatization could also drive optimism, leading to a market rally.
Do you think most of the risk factors are already priced in? If so, does that mean the market could rally sharply in February, especially after key events are over?
Markets seem to have priced in certain risks, such as inflationary pressures and geopolitical tensions. However, the extent of global monetary tightening or unexpected fiscal slippages remains uncertain. A favourable budget, easing inflation, and absence of significant global shocks could trigger a sharp rally post-budget and after completion of key events.
One needs to keep a watch on the US Bond yields as global markets are taking cues from it. On the day of the Trump election victory, the US 10-year Treasury yield was below 4% but now it has quickly shot up to 4.75%, indicating that the markets expect Trump policies to be inflationary. Any cooling off here is likely lead to an emerging markets rally.
What could be your contrarian bets for 2025?
In 2025, sectors such as agriculture technology, specialised manufacturing, and affordable housing may offer contrarian opportunities. Despite near-term challenges, IT services catering to emerging tech like AI and renewable energy ecosystems could outperform due to structural demand. Additionally, select mid-cap companies with strong fundamentals in under-researched sectors might deliver robust returns.
Do you see India maintaining a 6% growth rate in the coming years?
India has shown strong resilience despite global economic challenges, driven by strong domestic consumption, government reforms, and a digital revolution, reshaping all industries. While achieving a consistent growth of 6% & more is definitely possible in the coming years, a lot depends on maintaining momentum in infrastructure investments, private sector capex revival, and global economic stability. Any sharp geopolitical shocks or prolonged global monetary tightening could act as headwinds.
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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