Daily Voice | Private banks remain most attractively priced, poised for better performance: Client Associates' Rohit Sarin

The acceleration in Government capital expenditure is anticipated to gain momentum now, following a temporary slowdown during the national elections that occupied the federal administrative machinery until June. This resumption is crucial as government spending is a key driver for infrastructure development and economic growth. The pent-up execution of projects and a renewed focus on implementation should lead to faster disbursement of allocated funds in the coming quarters.

Is the ongoing consumption slowdown expected to continue for a few more quarters, though the long-term consumption story remains strong?

India's consumption pattern traditionally demonstrates a bipolar trend within the financial year. The first half typically shows subdued consumption levels, while the second half witnessed a significant uptick driven by the festive season. This year's scenario is particularly promising due to favourable monsoon conditions, which should catalyse rural consumption.

The agricultural sector's performance directly influences rural purchasing power, and with good rainfall distribution, we can expect enhanced rural demand. It's important to note that India's consumption story remains structurally intact, with no fundamental shifts that could impede its growth trajectory.

Do you see the possibility of the beginning of an interest rate cut cycle by the RBI in the December policy meeting?

The Reserve Bank of India's approach to interest rate management remains closely tied to global monetary conditions, particularly the US Federal Reserve's policies. Despite the Fed's policy shift, US interest rates have maintained their elevated levels. The RBI is likely to maintain a cautious stance, waiting for US rates to demonstrate a clear softening trend before initiating any rate cuts. This strategy aims to preserve the crucial interest rate differential between US and Indian rates, which is essential for managing currency stability and foreign investment flows.

Do you still see more downside risks than upside potential for the equity markets in the rest of FY25?

The market has undergone a healthy correction of approximately 10 percent across various indices, accompanied by a time correction where markets have remained rangebound for about five months while corporate earnings continued to grow. This dual correction - both price and time - has made Indian equity valuations more attractive for foreign portfolio investors (FPIs). With sustained domestic institutional flows providing a strong foundation and improved valuations creating opportunities for foreign investors, the market appears more likely to consolidate rather than experience further significant corrections from current levels.

Which sectors should investors focus on for the year ahead?

Private Banks continue to remain one of the most attractively priced sectors as of now and should be amongst the better performing sectors going forward. This is based on their current market valuations, operational performance metrics, and growth trajectory in the banking sector.

The pricing attractiveness of private banks stems from their current market multiples compared to their historical averages and growth rates. Their positioning in the financial services landscape, combined with their established track record and market presence, makes them well-placed for continued performance in the sector.

Are you bullish on the industrial sector?

With government capital expenditure continuing to be the driver of demand in the economy, industrials shall continue to participate and benefit from the same. This participation spans across various industrial subsectors that are direct beneficiaries of government spending on infrastructure and development projects.

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