Daily Voice: RBI might delay future rate cuts given weak rupee, uncertainty over Trump tariffs, says Shriram AMC's Deepak Ramaraju

Deepak Ramaraju is the Senior Fund Manager at Shriram AMC

Given the weakness in the rupee against the USD and the uncertainty of tariffs by the US government, the RBI might delay future rate cuts, said Deepak Ramaraju, Senior Fund Manager at Shriram Asset Management Company in an interview to Moneycontrol.

According to him, RBI will be watchful of incoming inflation data and currency movements before taking future rate cuts. As per their expectation, there could be status quo on interest rates in April policy meeting.

After the budget, Shriram AMC is optimistic about specific opportunities in auto, financials, consumer discretionary, durables, consumer services, and selected manufacturing companies, said Ramaraju with more than 20 years of diverse experience including 16 years of expertise in equity markets.

Do you believe that the equity market is less concerned about US tariffs now?

The equity market seems less concerned about US tariffs, as investors have likely factored in their impact over time. Market focus has shifted toward broader economic indicators such as interest rate policies, inflation trends, and corporate earnings. Unless new, unexpected tariff policies emerge, equities may continue to react more to macroeconomic fundamentals.

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Do you expect the RBI to continue cutting repo rate in April policy meeting too?

The RBI cut the repo rate by 25 bps. This was a welcome move given the slowdown in the economy and has been timed appropriately. India’s GDP is expected to grow at 6.3% to 6.6% for FY26, and the Monetary Policy Committee expects inflation to moderate to 4.26% for FY26. Given the weakness in the rupee against the USD and the uncertainty of tariffs by the US government, the RBI might delay future rate cuts. The RBI will be watchful of incoming inflation data and currency movements before taking future rate cuts. As per our expectation, April could be status quo on interest rates.

Do you foresee strong economic growth in FY26 with RBI announcing 25bps repo rate cut, following a consumption boost from the budget?

As the government cut the taxes for the middle class and now RBI bringing down the cost of borrowing, it augurs well for a strong consumption-led growth. Discretionary spending and premiumization themes are expected to perform better. Sectors like automotive, real estate, and discretionary segments such as jewellery, durables and white goods could do relatively better. Travel and tourism, quick service restaurants could also see the demand remaining buoyant. Overall, tax cuts and the lower cost of interest are the key ingredients for the stronger and structural growth in the years to come. One may expect the GDP growth to remain up of 6.4% due to these measures.

Do you expect a pick-up in private capex in FY26?

A strong consumption led economy is expected to manifest into stronger demand. As the demand grows, the private capex could increase to meet the demand and a cut in borrowing cost over the course of the year may support private capex. Moreover, a lower borrowing cost and a buoyant stock market could act as the key enabler for the corporates to tap the equity markets to raise capital and lower borrowing cost.

Where would you want to invest your money among sectors, especially after the budget?

After the Budget, we are making thoughtful adjustments to our portfolios with a balanced approach. The boost to consumption and manufacturing growth creates a strong outlook for equity market opportunities.

We are staying cautious by focusing on stocks with strong fundamentals and fair valuations to manage risks.

Our strategy combines growth sectors with defensive picks, ensuring a well-diversified and risk-aware portfolio. We are optimistic about specific opportunities in Auto, Financials, Consumer Discretionary, Durables, Consumer Services, and selected manufacturing companies.

Do you see the possibility of FIIs returning strongly in FY26?

The possibility of FIIs returning strongly in FY26 looks good driven by India's robust GDP growth (projected at 6.3% to 6.6%), rising corporate profitability, and government policies supporting investment. Indian markets, while considered pricey, but still seems to offer better returns, making them attractive for foreign investors. However, global factors such as US interest rate movements and geopolitical risks could influence FII flows. While some outflows were seen in 2024, the long-term outlook remains positive, with FIIs likely to return in phases as valuations align with earnings growth and macroeconomic stability.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.