According to Hemant Kanawala, Head – Equity at Kotak Mahindra Life Insurance, the measures taken by government including interest rate reductions and cuts in GST on select items are expected to boost consumption in the short term.
However, to create sustained recovery for the long term, robust and broad-based job creation is essential, he said in an interview to Moneycontrol.
On the FII flow, he is the view that if the current trajectory of improving fundamentals and earnings momentum continues, FII flows interest could start picking up meaningfully in the coming quarters.
Based on the recent commentary, do you expect the RBI to keep the repo rate unchanged throughout FY26?
The Reserve Bank of India has indicated that the current inflation trajectory remains relatively benign, which provides the central bank with some flexibility in its monetary policy stance. This moderation in inflation has opened room for potential easing in the future, should macroeconomic conditions warrant it.
In addition to this, the RBI has recently introduced a series of measures aimed at stimulating credit growth and supporting economic momentum. These include steps to enhance liquidity, improve transmission of rates and encourage lending to productive sectors of the economy.
Given this backdrop, while the RBI has maintained a cautious and data-dependent approach, we believe there is a possibility of rate cuts going forward, especially if inflation continues to remain within the target range and global financial conditions remain supportive.
However, any decision to alter the repo rate will likely be contingent on evolving domestic and global economic indicators, including growth trends, fiscal dynamics and geopolitical developments.
We do see scope for further rate cuts during FY26, depending on incoming data points.
Do you still have some concerns about the recovery in the consumer segment?
The government has taken several proactive steps to support consumption, including interest rate reductions and cuts in GST on select items. These measures are expected to boost consumption in the short term. However, to create sustained recovery for the long term, robust and broad-based job creation is essential.
A steady rise in household incomes and employment opportunities will be key to building consumer confidence and ensuring consistent spending patterns across urban and rural segments.
Encouragingly, the government appears to be focused on this aspect as well. It is actively incentivising industries to invest through various schemes and policy support, which in turn is expected to generate employment and stimulate demand. If these efforts translate into tangible job creation, it could lay the foundation for a more durable and inclusive consumption recovery.
Which sectors have attracted your attention for investment during the current market correction?
During the recent market correction, we have observed compelling investment opportunities emerging across both consumption-driven and investment-led themes.
On the consumption side, the government’s recent GST cuts have provided a timely boost to demand, particularly in discretionary categories such as automobiles and consumer durables. These segments, which had been under pressure due to subdued sentiment and inflationary headwinds are now witnessing a revival in volumes and investor interest. The easing of input costs and festive season tailwinds are also likely to support this trend in the near term.
Simultaneously, the government has maintained a strong focus on capital expenditure, especially in strategic sectors like defence and power. Increased budgetary allocations, policy support and a push for self-reliance (Atmanirbhar Bharat) in defence manufacturing have made this sector particularly attractive.
Similarly, the power sector especially renewables and transmission infrastructure, is benefiting from long-term structural tailwinds and government-backed investment programs.
Together, these sectors reflect a balanced mix of cyclical recovery and structural growth, making them well-positioned for long-term investment during this phase of market consolidation.
When do you foresee global investors renewing their interest in the Indian market?
Over the past year, Indian corporate earnings have lagged behind some of the other emerging markets, while valuations have remained relatively elevated. This combination—subdued earnings growth and a valuation premium—dampened India’s relative attractiveness for global investors, particularly Foreign Institutional Investors (FIIs), who sought better risk-reward opportunities elsewhere.
However, the landscape is beginning to shift. Valuations have corrected in recent months, bringing them closer to historical averages. At the same time, the macroeconomic outlook for India is improving, supported by a stable policy environment, robust domestic demand and a renewed focus on infrastructure & manufacturing-led growth.
As corporate earnings begin to show signs of recovery and the valuation gap narrows, we expect global investors to gradually regain confidence in the Indian market. Additionally, India’s structural strengths such as a large consumer base, digital transformation and policy reforms continue to make it a compelling long-term investment destination.
In our view, if the current trajectory of improving fundamentals and earnings momentum continues, FII flows interest could start picking up meaningfully in the coming quarters.
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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