Daily Voice: This wealth manager predicts RBI rate cut in April, bull run by late 2025

Kush Gupta is the principal portfolio and wealth manager of SKG Investment & Advisory

Kush Gupta, the Director at SKG Investment & Advisory expects the RBI Monetary Policy Committee (MPC) to repeat its action taken in February and cut the repo rate by 25 bps in April.

For the equity market, he believes by mid 2025, the market sentiment would have shifted and fundamentals will kick in. "And by the end of the year, we may see the start of another bull cycle," he said. According to him, the market has absorbed lot of negative sentiment, hence he believes the most of worst is behind.

Kush Gupta, who has over 17 years of experience in financial markets, is seeing improvement on various ends and Q4FY25 earnings should show a better result.

Do you foresee a 25 bps cut in the repo rate by the RBI in April to boost growth?

We expect the Monetary Policy Committee (MPC) to repeat its action taken in February and cut the repo rate by 25 bps. There has not been a significant increase in the economic activity in last quarter inspite of RBI cutting rates. We expect the rate to come down to 6 percent from 6.25 percent, with a primary objective of controlling inflation and starting the economic engine. Interbank liquidity has also been a point of concern lately with net liquidity been in deficit for almost a year now. Liquidity has been excessively tight lately and easing monetary policies will ensure that the banking machinery is running smoothly.

Do you believe the economic growth numbers for the March quarter (Q4FY25) will be much higher than the December quarter?

Our expectations from the last quarter of FY25 are definitely higher than the December quarter. There is always a natural sequential improvement in corporate earnings after one or two bad quarters. Q3 was better than Q2 so we saw some green shoots there of improvement which is most likely to continue in Q4. GST numbers have been a positive marker, RBI’s stance on easing monetary policy should increase spending and contribute to the earnings growth. Recent report by ICRA showed improvement in operating profit margins, coupled with revival of rural demand, we can expect revenue growth to reach 7-8 percent in the last quarter.

Do you think most of the negativity has already been priced in by the market? What is your market outlook for the rest of the calendar year?

To give an outlook, let’s break the market analysis in two significant parts – sentiment and fundamentals. I think a lot of negative sentiment has been absorbed, global uncertainty, tariff wars have been causing jitters amongst investors but most of it is behind us. Market is looking a glimmer of positively and I think the sentiment is ready to shift now.

Fundamentally speaking, corporate earnings have had a bad show for two quarters now, there has been liquidity and growth issues and the economy has slowed down after a stellar run for 2 years. This is cyclic and natural to any growth story. This may have caused short term downtrend by mid to long term, nothing has changed on the fundamental side of things. We are seeing improvement on various ends and Q4 earnings should show a better result. Reasons that made India a good market for investors are still there. My outlook is that by mid 2025 sentiment would have shifted and fundamentals will kick in and by the end of the year we may see start of another bull cycle.

Do you think most of the recently listed stocks are still trading at higher valuations?

It’s actually the other way around, In February we saw Quality Power, Ajax Engineering, Dr Aggarwal Health Care and Hexaware Technologies coming on the main board, only Hexaware is trading higher than the issue price and Dr Aggarwal is at par. On the SME front, we have seen around 20 IPOs in last 45 days and only 8-9 of them are trading in positive w.r.t their issue price. We are not in the phase of high market valuations, especially on the SME side we are seeing a lot value buying opportunities. Some of these companies are fundamentally good, strong businesses with good promoter backing, our view is positive and the next bull cycle.

Are exporters trading at stretched valuations even after the recent correction?

Companies that have a high export percentage as part of their revenue have been enjoying valuations recently even though markets have corrected. Exporters are usually looked at with a favourable view mainly due to their dollar income, relentless support from the government in policies both on global and domestic end. Currently I would say yes, the companies are trading at stretched valuations. They are lucky to have avoided the bloodbath experienced by the broader market. Going forward, we expect them to correct a bit. Majority of our exports are in IT sector that saw a massive boom post COVID, we are expecting that to cool off as well.

Biggest factor here will the geopolitical instability and tariff wars started by Trump. They could have a short-mid-term impact on our exports hence valuations can reflect that in form of corrections.

Do you think the correction in US markets is not yet over?

While the US markets have fallen over 5% in 2025 itself, I think we can expect more correction from here, especially in the tech sector. It has been doing very well and could see some more profit booking there. There could be an occasional bounce back but short term negativity remains on the account of trade wars and global uncertainty. If the Trump administration goes heavy on tariff imposition then we could see prices shooting up and inflation would then hurt the economy.

US companies that have global interests would suffer collateral damage due to the conflict as well. Trump’s policies while in the interest of US companies could see a short term setback as the market would adjust its expectations and brace for economic changes before levelling out and looking for a comeback.

Do you see a major risk from tariffs for the US compared to the rest of the world?

Tariff wars can be a double edged sword. While you are looking to protect homegrown companies and improving domestic production and provide more jobs, when pushed too far one may face retaliation from counterparts which may lead to undesirable results. In a recent study done by the American Chamber of Commerce to the European Union, it is estimated that this trade war is putting $9.5 Trillion at risk, which is the size of US-EU commercial relationship. This obviously is a two-way relationship so one can’t expect US to be unharmed from this.

It’s not just the EU, US has opened fronts with Canada and China as well which would affect their jobs and reduce manufacturing activity particularly in the rural areas. Hence my conclusion is that while China, EU and Canada are at a risk, but since US alone is fighting on all fronts, we can’t ignore the risks it now possesses due to the imposition of trade taxes.