Daily Voice: FPIs may turn incremental buyers if 4 factors improve, says Choice Wealth's Nikunj Saraf

Nikunj Saraf is the CEO of Choice Wealth

According to Nikunj Saraf, the CEO of Choice Wealth, FPIs can turn incremental buyers if US yields ease, the rupee steadies, tariff risk fades, and earnings breadth improves, even if aggregate EPS growth is closer to high single digits.

Policy steps that reduce friction for foreign investors also matter at the margin, he believes.

On the GST reform buzz, he feels that if the Council lands a clean two-slab framework (5% and 18%) and trims rates on everyday items, there should be a one-off step down in prices, which would reinforce the disinflation narrative. "Markets already treated the proposal as growth-friendly without flashing fiscal alarm, because simplification tends to lift compliance and collections over time," he said.

Are you still significantly concerned about tariff-related risks?

Yes, this is the swing factor for the next few weeks. A 25% tariff is already in place on some Indian exports to the US, with another 25% slated from August 27 unless talks change course. A narrower, delayed, or negotiated outcome would be an immediate sentiment boost; a broad-brush implementation would cap multiples and keep FPIs cautious.

Do you expect one more rate cut from the RBI in its October or December policy meetings?

One more 25 bps cut before year-end is plausible, but October feels early. The RBI held the repo at 5.50% in August and has been explicit about staying data-dependent. With headline CPI down to 1.55% in July, its lowest since 2017, the bar for an additional cut is lower, yet the MPC (Monetary Policy Committee) will want to see this softness persist alongside stable currency conditions. That tilts the odds toward December rather than October.

Do you believe the anticipated GST rationalisation could also have a disinflationary effect, thereby supporting further rate cuts, while not significantly adding to the fiscal deficit?

Yes, if the Council lands a clean two-slab framework (5% and 18%) and trims rates on everyday items, we should get a one-off step down in prices, which would reinforce the disinflation narrative. Markets already treated the proposal as growth-friendly without flashing a fiscal alarm, because simplification tends to lift compliance and collections over time. The exact impact hinges on the final design in the September 3–4 meeting.

Do you believe Foreign Portfolio Investors (FPIs) will return to India only when earnings growth reaches the 12–13% range?

Earnings help, but they aren’t the only gatekeepers. This year’s outflows, over $13 billion net so far, have tracked the dollar, US yields, and tariff headlines as much as India’s profit cycle. FPIs can turn incremental buyers if US yields ease, the rupee steadies, tariff risk fades, and earnings breadth improves, even if aggregate EPS growth is closer to high single digits. Policy steps that reduce friction for foreign investors also matter at the margin.

Given the recent announcements by the RBI and the government, do you expect a 10% rally in equities by 2025? Does this suggest that the market has already bottomed out?

A 10% move by year-end is possible, but not a base case without help from global rates and a benign outcome on tariffs. The GST roadmap and a cautious-easing RBI are positives; they improve the setup for the festive quarter. But with valuations elevated, the market will likely demand continued earnings delivery and calmer trade news before re-rating decisively. I’d call the lows “testable,” not conclusively behind us.

Are you bullish on private banks and NBFCs, given the anticipated pick-up in credit growth?

Selectively, yes. Large private banks with strong deposit franchises should benefit first when funding costs drift down. For NBFCs, the RBI’s partial rollback of earlier risk-weight tightness restores cheaper bank funding channels, which helps high-quality, diversified lenders. The counterpoint is that system credit growth has cooled to ~10% YoY, so leaders with liability strength and tight risk controls should out-earn the pack.

Is this the right time to include consumer discretionary and real estate sectors in one’s portfolio?

Gradually, and with quality bias. If GST cuts touch small cars and select durables, and EMIs edge lower as rates normalise, these pockets see the earliest demand uptick. Residential remains two-speed—mid-to-premium healthier than affordable—so I’d prefer cash-generative brands and low-leverage developers with visible launch pipelines, adding on dips as policy clarity firms.

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