Daily Voice: Interest rate cut by RBI not completely ruled out in December, says OmniScience's Ashwini Shami

The quick commerce sector is an attractive high-growth opportunity as it continues to disrupt the conventional businesses. However, one needs to maintain the valuation discipline while allocating to this space. The reaction from the convectional business is to be seen, whether it is going to be collaborative or competitive with the quick commerce.

Do you expect government spending to pick up in the second half of FY25?

Government spending, especially on the capex front has gone up sharply over the last many years. Capital expenditure on infrastructure over the last 10 years has grown from around Rs 2 lakh crore to more than Rs 11 lakh crore in FY 2024-25. The effective capex for this year is around Rs 15 lakh crore including the grant in aid. The government already has an aggressive spending plan and any slowdown in the spending in the H1 due to elections should get resolved in the 2nd half of FY2025.

Do you think most of the earnings cut risks are priced in?

While it is natural that the focus will now shift to the Q3 earnings, for us, as long-term investors, our focus is on FY26 and FY27 earnings and the corresponding valuations that one is getting for the respective earnings growth opportunities. The 2nd half of FY25 is also expected to be robust based on the GDP growth estimates and the focus now shifting on execution after the elections.

Is the market at crucial support levels after the recent sharp correction?

The markets are in a correction mode since end of September. The fall can be attributed more to the global factors, primarily, US elections and China stimulus package. Fundamentally, Indian economy remains robust with FY25 real GDP growth estimate of around 7 percent and moderating inflation, except for the month of October where it has gone slightly beyond RBI’s target range. For long-term investors we believe it is a good opportunity to add capital or orient their portfolios towards companies that are currently available at significant discount to intrinsic value.

Are you a buyer in the consumption space now?

We believe that the traditional consumer space continues to remain overvalued in spite of the recent fall of around 15 percent from the peak. The Nifty India Consumption index currently has a price to earnings (P/E) ratio of 45. From the broader consumption theme, we prefer the financial services companies such as payments and consumer finance. Other than consumption we like power, infrastructure and IT space which may have significantly better growth outlook and the current valuation matrices.

What do you expect from the RBI's commentary in the December policy meeting, even though a rate cut is ruled out?

The finance minister has talked about affordable bank interest rates to support industries and ramp up capacity expansion. Even commerce minister has urged RBI to cut rates to boost economic growth. We believe that a rate cut is not completely ruled out as the October high inflation number is primarily driven by the inflation in food items while the other core items were in 3-4 percent price increase range. If the food prices inflation is to moderate then RBI may have room for a rate cut.

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