Despite a 10% market correction from its record-high levels, Rajkumar Singhal, CEO of Quest Investment Advisors, believes there is still more downside ahead. He suggests that the Nifty 50 could potentially dip to 23,000, advising clients to consider adding to their positions at those levels. Singhal, who brings over 27 years of experience in global markets, particularly in fixed income trading, focuses his investment strategy on sectors aligned with India’s long-term growth drivers. In the consumption space, he targets companies in food delivery, quick commerce, travel, and retail. Meanwhile, with the government placing renewed emphasis on infrastructure—spanning power, railways, and telecom—Quest is investing in infrastructure, EPC, and industrial equipment sectors.
Do you expect around a 100 bps cut in the Fed funds rate in the next calendar year or during the first year of a new US President, Donald Trump?
There are two conflicting forces at play when it comes to U.S. monetary policy under a potential Trump administration. On one hand, tax cuts and tariffs—two central components of his policy—are inflationary by nature. On the other, Trump's government efficiency program, which has been assigned to Elon Musk and Vivek Ramaswamy, has a disinflationary effect. For example, Argentina's efforts in government efficiency have seen inflation drop significantly.
That said, the government efficiency program will take time to yield results, whereas tax cuts and tariffs could have more immediate effects. Inflation in the U.S. has started picking up again, which has led Jerome Powell to suggest that there's no rush to cut rates aggressively. Given this, I don't expect the Fed to reduce interest rates drastically in the near future.
Back home, most experts see an interest rate cut in the February policy meeting and not in December. Do you agree, and will the total cut amount to 50-100 bps in 2025?
India is facing a situation where CPI inflation has recently picked up, with the October print at 6.26%, which is above the RBI’s target of 4%. Although economic growth has slowed, this is not a clear signal for the RBI to cut rates aggressively. The RBI tends to be more reactive than proactive in such situations. Market expectations are pricing in a slight rate cut, and I would agree with this, with a potential 25 bps cut being more likely in February 2025. As for 2025, I do expect some more cuts, but a total reduction of 50-100 bps would depend on the inflation trajectory and economic conditions at the time.
Is the rally in gold looking unstoppable, even in the next calendar year?
Gold has taken a breather recently, following the U.S. election results. It is currently down about 7%, while Bitcoin has gained 27% and the U.S. dollar index is up 3.5%. This adjustment reflects the market digesting the election outcome.
Looking ahead, the direction of gold will be closely tied to inflation and growth in the U.S. If the economy grows faster, it could dampen demand for gold, which is traditionally seen as a hedge against inflation. On the other hand, rising inflation could support higher gold prices. So, while gold remains a key asset for many, its price path will depend on how Trump’s policies unfold and how inflationary pressures evolve in the U.S.
Do you think consumption weakness will persist in the second half of FY25 as well?
Economic momentum has indeed moderated recently, mainly due to subdued government capital expenditure, which is currently below 15% of the budget estimate. This is the lowest level in over a decade and has been impacted by election cycles. This slowdown has affected sectoral capex and, consequently, consumption, particularly in urban markets. Additionally, rising food inflation and housing costs have weighed on consumer sentiment.
However, government spending is expected to pick up post-election, which should provide a much-needed boost to consumption. Seasonal factors in the second half of the year could also help spur demand. Moreover, there is a noticeable shift in consumer preferences, with sustained demand in sectors like food delivery, quick commerce, affordable aspirational products, and travel and leisure, as consumers prioritize convenience and experiences over traditional retail.
Is the worst mostly over for the equity markets after the recent correction from record-high levels?
The market correction is a result of disappointing Q2 earnings and a large supply of stocks. FPIs have continued to sell, while retail investors are still adding to their positions, which indicates some tension in the market. In my view, we could still see further downside before the market stabilizes. A Nifty 50 level of around 23,000 is a possibility. Therefore, while there may be some short-term pain, it could also present opportunities for long-term investors to accumulate stocks at more attractive levels.
Do you believe that the long call appetite is decreasing in India?
Foreign portfolio investors (FPIs) have recently shown a decreasing interest in India, as evidenced by significant sell-offs in October and early November. Outflows of approximately Rs 94,000 crore in October and Rs 19,994 crore in November highlight this shift. This trend is largely driven by the high valuations of Indian equities, which, while performing well, are now perceived as expensive relative to other markets like China and the U.S.
Additionally, earnings downgrades in several Indian companies have raised concerns about growth prospects. However, I believe this is more of a tactical shift rather than a structural change. If corporate earnings improve, FPIs may return to India, but for now, they are cautious.
Which sectors and stocks are attractive bets now, especially after the recent market correction?
Economies cycle through growth and recessions, shaping corporate earnings, sector dynamics, and stock performance. Stock markets often anticipate these shifts, which unfold over years. Identifying the right sectors at the right time is critical for generating alpha with a margin of safety.
Through our Quest Smart Alpha Sector Rotation AIF, a multi-cap, sector-agnostic fund, we focus on sectors aligned with India’s structural growth drivers:
1> Consumption: Driven by urban income growth, evolving lifestyles, and experiential spending. We focus on companies in food delivery, quick commerce, travel, and retail.
2> Public Capex: With renewed government focus on infrastructure (power, railways, telecom), we invest in infrastructure, EPC, and industrial equipment.
3> Financials: Attractive valuations and growth across lending, insurance, wealth management, and housing finance add resilience to our portfolio.
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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