Daily Voice: India poised for economic revival by June 2025 amid RBI easing, growth optimism, says Harsh Gupta

Yes, in my view. Let us try to understand two things - where India stands in a structural sense, and where the global cycle is at. India has ~17% of the world's population, ~9% of global GDP PPP, 3-4% of global GDP as well as market cap in hard dollar terms, and just ~2% of global investable indices. But it is not just potential - India is the fastest growing major economy, a stable democracy, a young population and a market which has done well over decades.

We are at 6-7% real growth for now, though FY24 growth was north of 9%; going forward 7-8% assumption is not unreasonable. Moreover, India being a private-sector led model has better ROEs compared to bordering countries. The structural story is clear. Now in a cyclical sense, due to geopolitical changes in Europe and technological-economic changes in China partially thanks to a second Trump term, and the dollar being at multi-decade highs till a few weeks ago, we could be on the precipice of a 2002-03 moment whereby global allocators return to emerging markets especially given reasonable valuations.

Do you expect the market to consolidate in the first half before entering the next leg of the uptrend in the second half of 2025?

Some further consolidation is certainly possible; however, within a few weeks India should receive some clarity on the threat of US tariffs. With major elections at home/abroad behind us and RBI joining the global party in monetary and regulatory easing, the outlook is brighter. Moreover, FY26 as the last year of deficit-based consolidation (we will then shift to debt-GDP based fiscal policy), macro tightness should reduce. With tax cuts, infrastructure spend and deficit consolidation - the government has done a good balancing act as inflation also falls. Private capex not joining is also a slightly dated narrative; the data shows some positive movement. Finally, with large cap index valuations now at or below 20 on a trailing basis - there is some margin of safety as well.

Is India amid an economic and earnings slowdown?

India was in the midst of an economic and earnings slowdown for large parts of CY24, certainly, which may have spilled over to FY25 as well but the worst should be definitively behind us starting with the June 2025 quarter. RBI has not only cut and is likely to cut again, but it has also done OMOs (open-market operations), repo auctions and forex swaps worth many tens of billions of dollars to infuse liquidity. Combined with the low base effect, this should help both growth and earnings.

Are you bullish on the technology, pharma, and auto ancillary sectors?

Auto ancillary looks great as a sector. Technology and pharma are also two fantastic sunrise sectors, but one has to be slightly more selective there. I would add that financials look very attractive too - private sector banks are very reasonably valued and the capital market plays have seen significant correction.

Have you observed any green shoots in the revival of the consumption space?

Consumption acceleration follows macro easing as night follows day. More broadly, consumption itself is changing form - there are more brands and startups vying for pocketbook share at the top of the pyramid whereas at the bottom there is a shift towards more nutritious foods and housing stock in recent times. We should also remember that Indian retail is the largest holder of gold in the world - and as gold loans further take off albeit with safeguards, consumption should benefit given the strong rally in gold prices.

Do you see a high possibility of the US entering a recession this year?

At the moment the probability still looks less than even, though slowing growth/inflation is visible. There is also a rise in junk bond spreads and credit card delinquency rates, a restriction on immigration and the uncertainty of tariffs. Nonetheless with the short-term risk free there being more than 4% and shelter inflation (which has a high weight in US core CPI) being on a downward trajectory given its lagging nature - the Fed has enough ammo in its kitty. Trump's tax cut extension and a reduction in tariff uncertainty in the coming quarters should also help the US economy, though US financial and economic exceptionalism certainly seems over at least from a cyclical perspective.

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