"Uncertainties around earnings growth and inflation persist," Ashish Kashyap, the Founder & CEO of INDmoney said in an interview to Moneycontrol. Investors will need to take a wait-and-watch approach over the next few quarters, keeping an eye on both local and global economic trends, he advised.
Given the elevated inflation, he expects the RBI to continue their approach of keeping rates unchanged and focusing on ensuring inflation stability before pivoting to a rate-cutting cycle.
After the recent 75 bps fed funds rate cut, "it’s possible the US Federal Reserve will take a more cautious approach, allowing time to assess how the economy responds before the next cut. Market expectations for a December rate cut by the Fed also seem to have tempered," said Ashish Kashyap who holds a Master of Management degree from McGill University and an Economics degree from Delhi University.
Do you think all eyes will remain on the US at least until Donald Trump takes charge as US President?
Every change in government typically ushers in policy shifts and induces some uncertainty in macroeconomics. When it comes to the US, the world’s largest economy, such transitions naturally garner significant global attention. The US plays a pivotal role in shaping global economic and market trends, so most investors will be closely watching the potential changes the Trump administration may bring. The coming months promise to be interesting!
Do you see any slowdown in the Fed funds rate cut cycle after the 75 bps cuts in the last couple of policy meetings?
The Fed’s dual mandate is to promote growth while keeping inflation in check. The recent 75 bps rate cuts were aimed at stimulating the economy, but large, rapid cuts can sometimes overheat the economy and drive inflation higher. Recent data in the US already shows a slight uptick in inflation, so it’s possible the Fed will take a more cautious approach, allowing time to assess how the economy responds before the next cut. Market expectations for a December rate cut by the Fed also seem to have tempered.
Do you see any impact on Powell’s commentaries considering the possibility of inflationary policies from the Trump administration?
The US Fed appears to have adopted a more cautious stance recently, particularly as it aims to keep inflation around its long-term 2 percent target. While most economists still expect inflation in the US to continue cooling off, the Trump administration’s inclination towards tariffs and deportations could lead to temporary inflationary pressures. Hence you could expect the Fed to remain in a wait and watch mode.
Where can money be made among sectors from here on?
The Indian economy is currently benefiting from strong domestic demand and resilient economic growth. The consumer goods and retail sectors are thriving, driven by an expanding middle class and rising discretionary spending. Meanwhile, the financial services sector is capitalizing on increasing financial inclusion and the rapid adoption of digital banking. These could be sectors that will benefit immensely from continued economic growth and domestic demand in India.
Do you see any major risks for the Indian equity and growth story in 2025?
While Indian company earnings and markets have remained strong, India isn’t immune to challenges in the global macroeconomic environment. A slowdown in major economies could affect foreign investments, disrupt trade, and pressure the rupee. This would impact corporate earnings and widen India’s fiscal deficit. Additionally, escalating geopolitical tensions remain an overhang, potentially driving risk aversion among global investors. These factors will play a role in shaping how Indian markets perform relative to the global landscape.
Do you think the earnings pressure will persist in India?
India’s corporate earnings saw a slowdown in the last quarter, partly due to reduced government spending during the election period. This contributed to over Rs 1 lakh crore selloff by FIIs in October 2024, as money shifted to markets like China, which benefited from recent stimulus measures.
Uncertainties around earnings growth and inflation persist however, and investors will need to take a wait-and-watch approach over the next few quarters, keeping an eye on both local and global economic trends.
Despite these challenges, India’s longer term economic fundamentals remain strong, and targeted efforts to strengthen domestic industries, manage inflation, and boost exports will be critical for long-term growth.
Are you bullish on emerging markets, as most experts expect it to be a theme for the next few years, especially with the possibility of tariff hikes for China?
Global trade is undergoing a shift, with many companies diversifying supply chains in anticipation of tariff hikes for China. India stands out as a strong alternative due to its competitive manufacturing base and supportive policies like the PLI schemes. That said, the country still has work to do in improving infrastructure and ease of doing business to fully capitalize on these opportunities.
While India’s domestic demand and manufacturing push provide long-term potential, other Southeast Asian markets are also stepping up, adding to the competition. For India to really strengthen its position, it’ll need to focus on clear policies and making things easier for investors in the near future
Do you see the interest rate cut cycle starting in India only in FY26?
The RBI has maintained an extremely cautious approach given inflationary pressures and global market uncertainty. Even recently October saw retail inflation hit a 14-month high of 6.2 percent driven by food prices. Given this trend, we can expect the RBI to continue their approach of keeping rates unchanged and focusing on ensuring inflation stability before pivoting to a rate-cutting cycle.
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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