Daily Voice: This fund manager is upbeat on capital goods, financials; capex, rate cut the next big play

Anirudh Garg is the Partner and Fund Manager at Invasset PMS

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

The markets are forward-looking, and seem to have factored in potential interest rate cuts, which explains the buoyancy in metals, real estate and automobiles, Anirudh Garg, Partner and Fund Manager at Invasset PMS told Moneycontrol  in an interview.

Among sectors, he is optimistic about the capital goods and financial sectors. "The capital goods sector is poised for growth as the investment cycle takes an upward turn."

Further, in case of major market correction, sectors tied to capital expenditure and those sensitive to interest rate changes may become attractive, said the fund manager with more than 15 years of experience in stock market research.

Here is an edited excerpt of the interaction.

Yes, I am optimistic about the capital goods and financial sectors. In India, the capital goods sector is poised for growth as the investment cycle takes an upward turn. The government's increased focus on capital expenditure, as evidenced by the 2023 budget—where 19.5 percent of budgetary expenses were allocated towards capital expenditure, the highest in the last 20 years—underscores a strong commitment to this sector.

For the financial sector, especially those institutions that provide primary lending to the capital expenditure sectors such as railways, defense, infrastructure, and power, there is expected growth. Public sector banks, in particular, are likely to see significant improvement. They have effectively managed their non-performing assets (NPAs), are strengthened by capital raising initiatives, and benefit from robust NCLT laws.

With the economy showing signs of an upcycle, public sector banks are expected to outperform their private counterparts like Kotak Mahindra Bank and HDFC Bank. The RBI's cautious stance on the growth of retail lending, predominantly catered to by these private banks, further supports this view.

Considering the current economic indicators, it appears that the United States does not face the growth concerns previously anticipated, which suggests that a rate cut may be delayed. While it remains a topic of frequent discussion whether a rate cut will occur this year, it is crucial to note that the markets have already priced in the likelihood that there will be no further rate hikes. This is a significant factor moving forward.

The markets are forward-looking and seem to have already factored in potential rate cuts, which explains the buoyancy in sectors like metals, real estate, and automobiles.

Yes, there is a strong expectation for significant growth in the energy sector in India, particularly within the renewable energy subsegments. The Indian government has set ambitious targets, aiming to achieve 450 GW of renewable energy by 2030. The market is experiencing rapid growth, especially in solar and wind energy, which have seen substantial increases in installed capacity over the past decade.

Overall, the combination of government support, decreasing costs of renewable technologies, and increasing industrial demand paint a bullish picture for the future of the energy sector in India, with renewables leading the way.

Given the current market conditions, which are perceived as expensive with significant volatility expected due to upcoming electoral events, a cautious approach to portfolio management is advisable. In such a volatile market environment, defensive sectors typically provide a safer investment haven.

Once the market corrects and valuations become more appealing - leading to new investment opportunities - sectors tied to capital expenditure and those sensitive to interest rate changes, such as real estate, automobiles, and metals, may become attractive.

The Indian economy is somewhat in a Goldilocks situation. The government's focus on capital expenditure is commendable, particularly in a global economic environment that is sluggish. Currently, the largest concern for the equity market is valuation, particularly in leading sectors and the broadly celebrated mid and small caps, which have seen significant appreciation over the last two years.

Additionally, the upcoming election results pose a significant risk. Market sentiment could be greatly affected if there is a change in government, especially if the incumbent BJP does not secure re-election. This potential political shift could destabilize market confidence, particularly given the speculative distribution currently observed in mid and small-cap stocks.