Daily Voice: Saurabh Mukherjea believes RBI's rate cut pause if any going forward will not be viable given underlying slowdown in economy

Given the relentless selling pressure on the INR, the RBI’s language post the February 7 rate cut sounds like the central bank wants to take a pause. However, I believe that a pause will not be viable given the underlying slowdown in the Indian economy. I reckon that over and above taking measures to support liquidity, the RBI will have to push through more rate cuts this year to support the Indian economy.

Where sectors would you like to bet on post RBI policy and Budget?

Very early on in my career I learnt that in an economic downturn, one looks to increase exposure to export oriented sectors like IT and Pharma. Whilst we have already done that with our Indian portfolios, we are also encouraging our clients to invest in our Global Compounders Portfolio which consists of companies listed in North America for the most part. As you can imagine, the economic and rate cycle in North America is at a different place compared to India. Investing in North America therefore gives Indian investors much needed diversification.

Which stocks have you exited and increased allocation to after Budget and RBI policy?

We do not trade on the basis of specific macro events. The broad contours of the economic cycle are same decade after decade and there is a well-worn playbook on how to rotate through various sectors as the economic cycle waxes and wanes. As mentioned above, coming into 2025, we increased exposure to export oriented sectors and we cut exposure to domestic capex.

Do you see the strong possibility upward revision in growth forecast for coming years after recent policy decisions, but will that be impacted by Trump administration?

We don’t have a handle on how much what Trump is saying and doing is posturing and how much will actually translate into long term economic impacts on USA and India. As highlighted in our bestselling book “Behold the Leviathan: The Unusual Rise of Modern India”, we see 3 sectors in India as being well placed to benefit from Sino-American tensions: pharma, medical devices and electronics manufacturing.

Do you see any major risk factors for equity market that can derail the current momentum?

There is downward momentum in the Indian stock market at present. Given the subdued growth in corporate earnings in India and given the elevated valuation multiples prevalent in India, this downward momentum looks likely to sustain for a few more months. I believe diversifying into global equities is a must in such circumstances.

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