"Double-digit growth in nominal consumption will be tough to achieve," P Krishnan, the Managing Director & Chief Investment Officer – Equity Asset Management at Spark Asia Impact Managers said in an interview to Moneycontrol.
He sees no pricing power. And "even with pick-up in volume growth, the overall value growth should remain south of 10%," he said.
With respect to exporters, he feels the valuations are way too expensive even after a correction in the export-driven stocks. "Smart money may not see any merit in pre-empting a possible India-US trade deal in the offing," he said.
Do you think reliance on the US is declining globally?
In a mathematical sense, yes. The US has turned inward looking after many decades and that is a consequential development. All countries will try diversifying out of the dependency on US. However, US will remain too big a market to ignore for the foreseeable future.
Do you see the surge in gold prices as a signal of rising political uncertainty?
It is a sign of the mounting lack of confidence in the fiat currency system and the institutional framework around the same. There are signs that the US wants to use the extraordinary privilege that the USD enjoys in order to mitigate its debt burden. Earlier on, paper currencies of emerging economies saw massive breakdowns. Latam and Russia are examples.
The status of USD and EUR as repositories of value is eroding. Since currencies are priced and valued relative to one another, the loss of confidence across the board is resulting in a flight to safe havens such as gold.
Do you expect the government to introduce stronger measures, given the Centre’s focus on reviving the domestic economy?
GST 2.0 has already been unveiled. The government has limited leeway on the fiscal front and is on a tightrope walk. There may be measures to boost confidence. However, the economy has to weather the storm. We believe the government will focus on getting the best results from the measures already introduced.
Do you anticipate growth in NBFCs to outpace that of the banking sector in the short term?
In some pockets yes. But growth in credit during a period of macro turbulence can have disastrous after-effects. NBFCs that go up the risk curve to achieve growth may end up in a bad place just as it happened in the last cycle.
Do you believe consumption growth will remain below 10 percent, even after the GST reforms?
Double-digit growth in nominal terms will be tough to achieve. In fact, we see no pricing power and even with pick-up in volume growth, the overall value growth should remain south of 10%. However, there may be better outcomes in select categories.
Do you think the shift in market participants’ focus toward exporters will only happen after an India–US trade deal is finalized?
In a normal scenario, the market tends to price in key events beforehand. This time around, the valuations are way too expensive even after a correction in the export-driven stocks. Smart money may not see any merit in pre-empting a possible deal in the offing. It is possible that the market prices in other opportunities in the market that may come about due to trade related uncertainty.
What are the key triggers for the equity market in the second half of FY26?
On the positive side, the market will try to price in a resumption of the growth cycle in India which has been stalling for the last 5-6 quarters. Direction of earnings is a key factor for the market. Pick-up in credit growth and consumption demand revival are signs to watch out for.
On the negative side, we need to watch out for a possible deterioration in the US economy and more trouble for the USD. All potential risks being mispriced. For example, the market has not priced in the secondary impact of sluggish IT exports on domestic demand. The market is likely factoring in that the trade dispute with the US will be resolved. Triggers for the market are evenly balanced as we go into the second half of FY26.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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