He believes that festive demand recovery, a favourable monsoon, and positive earnings momentum could act as key catalysts for Indian equities in the second half of FY25.
Satija also highlights the growing strength in rural consumption, FMCG, infrastructure, and pharma sectors, while cautioning investors about stretched valuations in defence stocks.
In this conversation, he discusses market trends, sectoral opportunities, FII flows, and SEBI’s regulatory measures aimed at protecting retail investors. Edited Excerpts –
Q) Thanks for taking the time out. Markets are struggling in the first month of 2H2025. What is limiting the upside?
A) Generally, the first quarter remains a cyclically weak quarter for many sectors. Banking activity also remains muted given moderate industrial uptake, employee transfers, etc.
The market seems to have factored in most of the domestic as well as global developments, hence it is undergoing time correction and looking for new triggers.
Upcoming events such as US-India trade deal agreement, healthy festive led consumption recovery, above average monsoon and positive earnings could be new drivers for the market in coming quarters.
Q) The June quarter season has just begun – how do you see India Inc. faring in this quarter? Which sectors should investors watch out for?
A) Healthy rural demand and recovery in urban consumption led optimism in FMCG sector could be a theme to watch out for this earnings season. Additionally, agri-related sectors such as fertilizers, crop-protection businesses and tractor OEMs could be the ones to watch out.Q) Everyone says it is a stock pickers market now and the day of making easy money is over. What are your views?
A) In the last 5 years, post the Covid led correction, the Nifty 50 TR and the broader Nifty 500 TR have yielded investors 21.3% and 24% returns respectively. Multiple sectors and companies are trading at premiums to respective long-term averages.
There are several external factors such as demand challenges in domestic as well as offshore markets, dumping of goods by China, geopolitical uncertainty led supply chain and logistical issues which can adversely impact some sectors.
Investors should look for selective ideas from a medium-term investment horizon and any correction can be utilized by investors to further add to their portfolios.
Q) SIP crossed Rs 27000 cr for the first time in June. What is boosting the momentum?
A) The adoption of mutual fund investments in India has seen an accelerated adoption, especially in B30 (beyond top 30) cities, supported by financialisation of savings, growing awareness through investor education, rising digital penetration, and the growing reach of financial service providers.
The share of new SIP registrations from B30 cities has increased to 56% in FY25.
Q) FIIs are still not back in India completely – is it valuations or earnings which are proving to be headwinds?
A) Though FII flows may not be fully back, they have improved in the last three months ($1.3bn, $1.7bn, $2.4bn respectively in Apr-25, May-25 & Jun-25).
Despite the recent rally which has taken the index to a premium (~5%) over its long-term average in terms of P/E valuation, the Nifty 50’s single digit returns over the past six months remains tepid relative to some of other emerging market’s double-digit returns.
Various factors such as key Govt. initiatives, frontloading of RBI rate cut cycle, under-control inflation, pick-up in Govt. capex spendings and aspirations to become the third largest economy, all cumulatively are likely to support improvement in macro parameters to attract strong FII flows in the quarters ahead.
Q) Which sectors are likely to drive momentum in the 2H2025?
A) Outlook for the FMCG sector, particularly rural-focused consumption looks positive on the back of favourable monsoon, easing inflation, healthy rural recovery, expectation of higher disposable income owing to tax relief and rising premiumization trends.
In the Pharma & Healthcare sector, CDMO (Contract Development & Manufacturing) presents a long-term opportunity.
Amid expectations of a ramp-up in Govt. capex, infrastructure and utilities sectors (eg. Power, Railway and Defence) could see strong order flows in 2HFY26.
Q) Any sector(s) which you think is overheated?
A) In the backdrop of geopolitical uncertainties and war-like situation, expectations of an elevated defence budget and accelerated spendings for weapon procurement programme led to a significant rally in all the defence related stocks to stretched valuations over the long-term averages.
Q) Despite recent regulatory steps, retail investors still account for 91% of the losses in the derivatives segment. What more can SEBI do to protect them?
A) SEBI has been proactive in introducing measures to mitigate risks for retail investors. The regulator is exploring moving the weekly option expiry to a fortnightly expiry as one of the alternatives to control surging volumes.
Another volatility boosting tool i.e., Algo Trading, which also received overwhelming response from retail investors, will be regulated with the new guidelines effective August 1st, 2025. While the regulator is taking several steps, market participants have to increase awareness among investors for taking informed decisions.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)