Sumit Bhatnagar: As far as global markets are concerned, we’ve been witnessing intermittent bouts of volatility, driven by both economic and geopolitical factors. Regarding Trump, this issue has been ongoing for the last two to three months. So, a large part of it is already priced in, barring some short-term surprises that may arise from his announcements related to countries like Mexico or Brazil.
However, when it comes to India, the outlook remains positive. Domestically, we are constructive on Indian markets simply because we expect economic activity to pick up. Along with that, we anticipate a corresponding improvement in corporate earnings — supported by lower interest rates, ample liquidity, and valuations that are more or less in the fair zone, especially when looking at the broader indices. From a medium- to long-term perspective, India remains very well-positioned.
So, you’re strongly backing the India growth story. But having said that, I’d like to know about your sector-specific strategies. There’s been a lot of rotation happening — so what’s on your radar? Which sectors are the hits and misses for you?
Sumit Bhatnagar: In terms of sector preferences, we’re increasingly positive on the consumption theme. We believe consumption is at an inflection point, driven by improvements in both rural and urban demand. Rural consumption is benefiting from a good monsoon so far, healthy reservoir levels, and higher MSPs. This should lead to a continued pickup in rural economic activity.
Additionally, tax cuts that have already been implemented are expected to play out over the next six to nine months. On top of that, regulatory rollbacks by the RBI for lending institutions, lower interest rates, and ample liquidity should also support consumption growth.Looking ahead, the upcoming pay commissions will be a key driver as well. The central pay commission is due next year, followed by state pay commissions the year after — together putting nearly ₹3 lakh crore into the hands of consumers. There is also talk of GST rationalisation in the FMCG space, which should provide an incremental benefit.All of this suggests that after five years of underperformance, FMCG may be at the start of a recovery. While this quarter’s numbers may be muted, our outlook for the next two to three years is positive. Accordingly, we’ve increased our exposure to consumption in our portfolios.
We’ve just seen the WPI numbers come in at -0.13%, which puts us in deflationary territory for wholesale prices. CPI, too, remains well below the 4% benchmark. In the current scenario — where crude is stable around $70 and the interest rate trajectory is relatively clear — which sectors do you see getting re-rated, and where do you expect de-rating?
Sumit Bhatnagar: When it comes to re-rating, we are optimistic about sectors like cement and consumption. In cement, if pricing holds and demand picks up post-monsoon in the second half, we could see earnings improve. As discussed earlier, we also expect a significant pickup in consumption, both rural and urban, in the second half of the year.
These two sectors — cement and consumption — are where we foresee meaningful re-rating going forward.
On the other hand, sectors exposed to global dynamics, like IT and metals, could face de-rating. This would be driven by continued global uncertainty and economic weakness in key markets such as the US, China, and Japan — which are critical drivers of demand for commodities like metals. So, those would be the sectors where we see potential for de-rating.