Speaking to ET Now, Jain noted that while consumer-facing sectors could see some outperformance if markets remain weak, valuations in staples, white goods, and discretionary categories are already expensive. “Multiples are somewhat reasonable in the auto OEM space, but it remains to be seen whether anticipated rate cuts boost volumes or merely encourage consumers to upgrade,” he said.
While reiterating optimism on India’s long-term trajectory, Jain warned against chasing overheated pockets. “Excesses are visible in small and midcaps. I would stay cautious there. For investors with realistic expectations, largecaps remain the best bet,” he added.
On the government’s push to put more money in consumers’ hands, Jain argued that the impact would be marginal. “India is a $4-trillion economy. A $10-billion benefit is meaningful for the marginal consumer, but it cannot fundamentally alter medium- to long-term growth. Household leverage has risen sharply post-Covid due to digital loans and EMIs, and that demand front-loading is now showing up in lenders’ asset quality,” he said.
Market seen healthy time correction; temper expectations
India is steadily growing, and while the government’s actions seem to be a positive move, it’s a bit too bold to claim that this will drastically change the growth path or the performance of consumption stocks in the medium term, says Jain.
Regarding market levels, Jain pointed out that indices have been consolidating between 22,000 and 26,000 for the last 18 months. “This has been a healthy time correction. In three to six months, markets will start pricing in FY28 earnings. At current levels, largecaps look reasonably valued. The next few months provide a good window for investors, but one must temper return expectations in a low-inflation, 6–7% real growth environment,” he observed.
Spillover into services will be a bigger tariff risk
On the US tariffs, Jain struck a calm note. “India’s goods exports to the US are only about 2% of GDP, and the value addition in categories like mobile phones, polished diamonds, and petroleum is limited. At most, half a percent of GDP could be impacted. The effect will be felt in select industries, but the overall macro impact is negligible. The bigger risk would be if this spilled over to services, but that looks unlikely,” he said.
Jain also flagged excess supply of equity as a factor keeping markets in check. “Block deals, QIPs, promoter sell-downs, PE exits—supply has been large. This is actually healthy, because without it, markets could have overheated. Importantly, volatility in Indian equities has collapsed over the last 25 years, down almost 70%, thanks to domestic investors gradually displacing FIIs. That’s a very welcome structural change,” he said.