Capex-related sectors particularly on the private side (like semiconductors) could be a pocket to watch out for in 2025, said Rajesh Cheruvu, the MD and Chief Investment Officer at LGT Wealth India in an interview with Moneycontrol.
Further, he believes renewable energy plays - preferably indirect or second order - are also attractive, especially in the transmission & distribution space.
Certain pockets within consumption - like gold/jewellery/hotels - could also be in focus as witnessed by the lifetime high gold imports seen in November 2024 trade export-import data, said Rajesh Cheruvu with two decades of experience in the financial services industry.
Do you expect the equity market to face more challenges than tailwinds in 2025?
While earnings for H2FY25 might be a tad soft given the challenges seen especially in consumption, consumer lending, build-up of household debt etc., CY25 might see some cushion from interest rate cuts. Debt is also an option now for corporates given their balance sheets have been very clean and hence a re-leverage via industrial credit growth could stoke up the investment engine of the GDP wagon. Election fervour will also subside in CY25 with only Delhi and Bihar having State Legislative elections versus 8 states contesting in CY24.
Have you identified any sectors to bet big on for 2025?
Capex-related sectors particularly on the private side (like semiconductors) could be a pocket to watch out for. Renewable energy plays (preferably indirect or second order) are also attractive, especially in the transmission & distribution space. Certain pockets within consumption (like gold/jewellery/hotels) could also be in focus as witnessed by the high gold imports in November 2024 trade export-import data.
What could be the focus areas in the Union Budget, the key event of the next quarter?
So far Corporate tax collections have been lagging the FY25BE run-rate, with the other Direct Tax component (Income tax) doing very well. This has been the case with GST and other indirect taxes. Capex as a theme has majorly been pushed onto the states in the last FY25 BE. FY26 BE could see a few tweaks to shore up the capex headline number but should only marginally move the direct centre’s capex. Some corporate or private sector boost to profitability could be in focus – after all GVA (and hence, GDP) is a function of value add or profits. This would also help Corporate taxes.
The new Revenue Secretary Arunish Chawla could be some form of an unknown in terms of variables to the Tax revenue budgeting, given his predecessor Sanjay Malhotra (now RBI Head) was relatively tough in decision making (removal of indexation benefit for Real Estate and debt MF gains etc.) and might not upset the apple cart too much in his first Budget.
After reading the December policy meeting, is the Federal Reserve being cautious ahead of Trump's policy decision?
Yes, a certain amount of caution in terms of lowering the real GDP growth projections over the next year for the US can be perceived as an outcome of the FOMC meeting. There especially seems to be some expectations of CPI rearing its head towards the second half of the year from potential expansionary or tariff-related fiscal policies of President-designate Trump.
Do you think the Reserve Bank of India will not go beyond a 50 bps interest rate cut in 2025?
The 50-bps rate cut cycle might be a little bit of a stretch. With the Fed having bitten the bullet very early and called for a rate cut on December 18, 2024 – this has left them decent leeway to keep rates unchanged for now for longer given the likely inflation-stoking nature of Trump’s fiscal policies.
On the other hand, at the moment difference in rates between India (6.5%) and the US (4.5%) is the lowest in a long time, again leaving little room for the RBI to cut a lot. Having said that, while US GDP growth looks relatively more sanguine, India arguably needs a slight nudge to shore up slowing down consumption – the largest engine of the GDP wagon. The recent CRR (cash reserve ratio) cut by the RBI is a step in the right direction but more would be needed. Timing within the rate cycle could be tricky.
Are you bullish on the consumer discretionary sector?
Certain pockets within consumption (like gold/jewellery) could be in focus as witnessed by the high gold imports in November 2024’s trade export-import data. Hotels with decent valuations could also be attractive especially where RevPar and occupancy both have room to increase towards more comfortable levels. The rise in the ASPs of auto OEMs could augur well in terms of margin protection but there might be an elastic dent in volume growth impacting topline.
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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