"If Jerome Powell indicates challenges in pushing another rate cut, the RBI may not be able to cut rates further, thanks to the declining spread between US and Indian Government paper," Manoj Trivedi, Director of Strategy at Maxiom Wealth, said in an interview to Moneycontrol.
According to him, the markets will correct a bit in the next 30 days despite some good results.
He does not think that the worst is over for the technology companies. "We are clearly underweight in so far as the large IT behemoths are concerned, but quite hopeful about some smaller-sized companies operating in niche space," said the Chartered Accountant.
Do you see the possibility of the US lowering tariff rates for China to 40% from the current rate within the next 10 days?
The objective of imposing Tariffs was to make large exporters like Mexico, China, and India allow greater access to their markets to US companies, reducing Trade deficits. Different countries have responded differently. China retaliated with reciprocal tariffs. India has opted for a bilateral deal.
We do expect China and the US to come back to the negotiating table. The Indo-US deal will provide insights into the way forward for the 2 largest economies. Whether it is 40% or any other number is debatable. It will happen only after the India-US deal becomes public. Unlikely in the next 10 days.
If the war continues for more than a month, will the possibility of a slowdown in the US increase significantly?
Continued hostility in trade relations will adversely impact the US economy, with higher inflation and lower growth. Whether we will see this happening in 30 days will depend on inventories being held in the US and the alternatives being worked out to secure supplies. For example, Apple shipped out all manufactured iPhones from India to the US, days before proposed higher tariffs were to be implemented. Both the US and China will find second-best alternatives that suit them the best. In the process, India could benefit, and Vietnam could lose.
With the double-digit rally from the April lows, do you think most of the positives have already been discounted by the market?
Markets will continue to be dynamic, and every day, new information gets unveiled. Markets will react to such information based on whether it is “as per expectations”. Currently, the focus is not on Q4 numbers. We expect India’s GDP numbers to be higher than expected, on account of Kumbh and a better-than-expected Eid. If that happens, markets may find more fuel.
On the other hand, if Jerome Powell indicates challenges in pushing another rate cut, RBI may not be able to cut rates further, thanks to the declining spread between US and Indian Government paper. We now have the new dynamic of potential conflict with Pakistan in response to Pahalgam. While it is impossible, not just difficult, to predict the short-term movement, we feel that the markets will correct a bit in the next 30 days, some good results notwithstanding. However, we remain long-term positive.
What are the major threats to the market and the economy for the remainder of 2025?
A prolonged conflict with Pakistan cannot be entirely ruled out, given that the whole country/ world are expecting a befitting reply from the Indian Government. Wars of any kind are bad news for markets. Stagflation in the US and a weak dollar can further impact export potential and therefore, GDP growth. Unfortunately, a likelihood of a sharp decline in INR due to conflict can also adversely impact our economy and markets. If corporate results turn out to be less than benign, we might see some more selling.
Do you think the worst is not yet over for the technology space?
No. We do not think that the worst is over for the Tech companies. It all depends on the nature of the work that is being done. We are clearly underweight in so far as the large IT behemoths are concerned, but quite hopeful about some smaller-sized companies operating in the niche space. It is no longer just about cost arbitrage. It is about the delivery excellence of cutting-edge technologies. One needs to be proactive, identify issues, work out solutions, and lead from the front.
Are you a buyer in the auto and ancillary space?
We follow a bottom-to-top approach. We do not look for specific sectors and then drill down on companies. Our Algorithm first picks companies across sectors, and we then look at the sectors to which they belong and how they are likely to perform in the given environment. We do see some companies doing well in the auto and ancillary space. They meet our Roots and Wings philosophy is poised to benefit from the current business environment are also available at reasonable valuations.
Which are the top three sectors on your radar for portfolio allocation?
BFSI, defense, electronics, and select companies in the technology space are looking good to us.
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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