Daily Voice: Need short-term measures in Union Budget 2025 to stimulate demand and support consumption recovery, says Bajaj Finserv AMC's Nimesh Chandan

Over the past few years, the government has prioritized long-term economic growth through increased capital expenditure (CAPEX), a strategy that remains prudent. However, urban consumption has recently slowed, highlighting the need for short-term measures to stimulate demand and support consumption recovery.

Do you expect the government to cut the divestment estimates for FY25 and increase it for FY26?

The union government no longer specifies disinvestment targets in its budgets but instead provides estimates under miscellaneous capital receipts. With three months remaining in the fiscal year, it is uncertain whether this year’s estimates will be achieved. Disinvestment remains a crucial revenue source for the government. As the government focuses on boosting economic activity, it is likely that disinvestment receipt estimates will be revised upward in FY26 to support this agenda. This aligns with the broader strategy of leveraging disinvestment to fund growth initiatives and strengthen fiscal resources for sustained economic development.

Do you expect significant geopolitical and global economic developments in the next few weeks due to Trump 2.0?

The policy changes in the US are still evolving. There is a possibility of higher tariffs by the US on different countries & some tit-for-tat reaction. This can bring some volatility in the global macroeconomic landscape. However, we believe that changing economic policies in the US will have a limited direct impact on India.

Do you foresee a dovish policy stance from the RBI in February?

RBI is currently facing the classic ‘central bank trilemma’. Inflation is still above its comfort zone. Growth rates have come off & INR is under pressure. We believe this year to be a challenging year for RBI. A too-early ‘dovish stance’ can flare inflation & also put further pressure on the rupee. We expect RBI's stance to be more measured.

Will the equity markets consolidate over the next couple of quarters before gaining strong momentum toward a new high?

GDP growth has slowed down & corporate earnings have seen downgrades in the last few months. With valuations at higher levels (especially for the broader markets), it is likely that markets can remain volatile in the near term. Rural economy revival & growing global economy are positive. Markets should stabilise in the next few months & then gather momentum.

Which sectors appear to be attractive enough in the current market downturn?

We hold a positive outlook on the consumption and allied sectors, with several companies trading at highly attractive valuations compared to their historical levels. Additionally, we are optimistic about the pharma sector, as we believe the market is underestimating new growth opportunities in areas like CDMO and GLP-1. Furthermore, we are increasingly positive on global cyclicals, particularly IT services.

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