Daily Voice: With government increasingly focused on consumption, infrastructure capex appears to have peaked, says Ashish Chaturmohta

The Monetary Policy Committee (MPC) chose to keep rates unchanged, preferring to wait for greater clarity on the effects of tariff increases, GST reductions, and the transmission of earlier easing measures. A split emerged as two external members argued for a shift toward an accommodative stance, highlighting scope for future cuts.

With the FY26 inflation forecast lowered again to 2.6 percent and the likelihood of further downside, the case for a December reduction is building. Softer demand, easing core inflation, and slower nominal GDP growth suggest early, and well-calibrated policy support will be essential.

Do you believe that most companies which have recently launched IPOs are overvalued? Are there concerns about the quality of these IPOs, especially given the flood of new listings?

Recent IPO activity has been buoyant with Rs 85,000 crore raised so far in CY2025, with some offerings appearing stretched on valuations as companies capitalize on strong market sentiment and liquidity. Concerns persist around the quality of certain issues, particularly where earnings visibility is weak or business models remain untested.

However, several high-quality companies with scalable operations, strong governance, and clear growth potential are also coming to market. For investors, careful selection will be crucial to identify sustainable value while avoiding opportunistic listings that may underperform.

Do you think the next 3-6 months will be challenging for the market, given the persistent FII outflows?

So far in CY2025 the Indian markets have seen persistent FII outflows of roughly $16.8 billion, but this is being balanced by even stronger domestic inflows of over $56 billion supporting the market.

With US markets trading at high valuations and yields trending lower, emerging markets may become more attractive, potentially prompting a reversal in FII flows into India. While other EMs have performed well recently, India could see similar gains, benefiting from renewed foreign interest alongside robust domestic participation, creating a more balanced outlook despite near-term volatility.

Which sectors are you focusing on within the consumption theme?

Within the consumption theme, we are focusing on automobiles, consumer durables, retail, and electronic goods, where demand is most responsive to incremental savings. Post-GST reductions, savings from big-ticket purchases like autos and appliances are expected to flow into smaller categories such as apparel and footwear, boosting volumes and operating leverage.

We are particularly positive on companies poised to benefit from a rural consumption recovery, which forms a significant part of overall demand. That said, our approach remains highly stock-specific, prioritizing businesses with strong fundamentals and growth visibility.

Has infrastructure capex already peaked?

With the government increasingly focused on consumption, infrastructure capex appears to have peaked. Limited fiscal space following GST cuts and tax rationalization is likely to constrain new projects. While ongoing initiatives will continue, fresh investments may remain muted, and private participation cautious amid cost and demand pressures.

Overall, infrastructure spending is expected to soften, reducing its contribution as a key growth driver compared to previous years.

Are you overweight on the banking sector?

We maintain a neutral stance on the banking sector, with a balanced allocation across private banks, PSUs, and non-lending financials. While private banks continue to benefit from strong retail growth and improving asset quality, PSU banks offer value play potential amid ongoing reforms.

Non-lending financials provide diversification and steady fee-based income. Given the mixed outlook on credit growth, margins, and regulatory developments, a neutral, well-diversified approach helps manage sector-specific risks while participating in selective opportunities.

Is it better to play the internet platform theme through quick-commerce companies, which have performed relatively better even during economic pressure?

The internet platform theme offers several avenues for participation, including quick commerce, AI, data centres, and broader digital services. Although quick commerce companies have delivered better performance in turbulent times, we believe some of them are on the verge/have already started to deliver better operational performance.

So we have positioned our portfolio accordingly. At the same time internet hardware infrastructure provide structural opportunities, supporting the broader digital ecosystem and enabling scalable growth over the medium to long term.

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