In the Union Budget, "with growth challenges emerging—particularly in consumption—measures to address this will be crucial," said Arindam Mandal, the Head of Global Equities at Marcellus Investment Managers in an interview to Moneycontrol.
According to him, consumption growth ultimately drives private capex, so proposals targeting this area will be closely watched.
On the economic growth front, he said while the long-term growth story remains intact, cyclical sluggishness, particularly evident in corporate earnings, could pose short-term hurdles. If India chooses to lower interest rates to stimulate the economy, it could add pressure on the currency, said Mandal with more than 14 years of experience in investment management.
Do you believe the dollar will remain strong in the long term?
From India’s perspective, a 3 percent annual depreciation in the INR is a healthy benchmark, reflecting differences in long-term bond yields or inflation. Such depreciation supports India’s ambition to become an industrial powerhouse. However, the dollar has already seen a significant appreciation against the broader currency basket since Trump won the election.
In the longer term, as long as the USD remains the global reserve currency—which is our base case—its status as a safe-haven asset should persist. That said, the recent ~6 percent rise in the DXY (US Dollar Index) over three months is unsustainable. With the US pushing for reshoring and re-industrialization, it is likely they will aim to manage the dollar's appreciation.
Is India experiencing a cyclical slowdown when comparing the rupee to the dollar?
It’s possible, and this may be a near-term challenge unique to India. While the long-term growth story remains intact, cyclical sluggishness, particularly evident in corporate earnings, could pose short-term hurdles. If India chooses to lower interest rates to stimulate the economy, it could add pressure on the currency.
Will asset classes face difficulties in terms of performance if Donald Trump implements tariffs?
This is a guessing game, and much of it might already be priced in. However, heightened policy-related news flow—whether about tariffs or other measures—could increase volatility. The direct incremental impact of tariffs on corporate earnings may be less severe than during Trump’s previous presidency, given better preparedness. But the indirect effects remain uncertain and challenging to predict.
What are FPIs or global investors expecting from the Union Budget?
Global investors appreciate India for its fiscal discipline alongside economic growth. However, with growth challenges emerging—particularly in consumption—measures to address this will be crucial. Consumption growth ultimately drives private capex, so proposals targeting this area will be closely watched.
While exports can be a bright spot, broad-based domestic consumption is key for sustained economic growth. These measures could take the form of tax reforms, accommodative fiscal policies, job creation initiatives, or steps toward privatization and disinvestment. How the budget provides clarity on these fronts will be vital.
Do you see the US Federal Reserve cutting interest rates only in the second half of 2025?
Our stance remains unchanged—barring significant economic weakness in the US, which has shown remarkable resilience, the need for rate cuts appears limited.
Do you think the RBI will announce a rate cut in February and then take a pause for a few policy meetings?
It wouldn’t be surprising to see dovish policy actions from the RBI in the coming year.
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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