Rishabh Nahar of Qode Advisors expects the RBI to implement further rate cuts to the tune of 75 basis points in FY26. "This will be contingent on inflation staying within the central bank’s comfort zone and global interest rate movements," he said in an interview with Moneycontrol.
In an environment of heightened global trade tensions, domestic-focused sectors appear more resilient, he believes.
According to the Partner & Fund Manager at Qode Advisors, the infrastructure, banking, capital goods, and manufacturing stand to gain from government-led investments and structural reforms. Additionally, sectors such as defense and specialty chemicals could benefit from global supply chain diversification, he said.
Do you see the RBI implementing further rate cuts in FY26?
I expect the RBI to implement further rate cuts to the tune of 75 basis points in FY26. This will be contingent on inflation staying within the central bank’s comfort zone and global interest rate movements. While domestic growth may warrant a more accommodative stance, the RBI will also be mindful of currency stability and capital flows when deciding the pace of easing.
Do you expect the economy to regain momentum in the coming financial year, considering the expected increase in government spending and further repo rate cuts by the RBI?
The combination of increased government spending and potential monetary easing could provide a tailwind to economic growth. Key sectors such as infrastructure, manufacturing, and financial services are likely to benefit. However, external factors, including geopolitical risks and global trade uncertainties, could influence the overall growth trajectory. While domestic demand remains strong, sustained private sector investment will be crucial for long-term momentum.
Are you cautious about FMCG and IT services?
Yes, both sectors present near-term challenges. FMCG companies continue to face headwinds in rural demand recovery, and valuations remain elevated. The monsoon's performance and inflation trends will be key determinants for the sector. IT services, on the other hand, are navigating a slowdown in enterprise tech spending, particularly in the US and Europe. While a potential Fed pivot could provide relief, companies with strong AI and cloud capabilities may outperform their peers.
Where would you prefer to bet, given the rising uncertainty due to global trade tensions?
In an environment of heightened global trade tensions, domestic-focused sectors appear more resilient. Infrastructure, banking, capital goods, and manufacturing stand to gain from government-led investments and structural reforms. Additionally, sectors such as defense and specialty chemicals could benefit from global supply chain diversification. Select opportunities in energy transition and digitization also remain attractive.
Do you see any recessionary signals in the US economy?
The US economy is showing recession. Indicators such as yield curve inversion, slowing job growth, and softening consumer demand suggest caution. AI-driven capital expenditure and fiscal stimulus have provided some support, but if inflation remains sticky and interest rates stay high for an extended period, growth could slow further. The risk of a recession or a prolonged soft patch remains.
Do you believe the worst of the earnings slowdown will end with the announcement of Q4FY25 earnings? Do you foresee earnings growth in the range of 12-15% in FY26 and FY27?
A 12-13% earnings growth is something we expect in the large-cap space. There is a lot of earnings visibility amongst the larger businesses. The slowdown is dependent on a lot of global factors, especially a recession in the US. This could impact the coming quarters for many small- mid cap businesses. On a consolidated basis, we will definitely see earnings growth, but individually you will see businesses see a slowdown if they are dependent on global macros.
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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