GST cuts, low inflation to boost festive consumption; insurance emerges as long-term bet: Nitin Raheja, Julius Baer – News Air Insight

Indian equity markets are entering a crucial festive season with optimism, but much of the near-term excitement from Goods and Services Tax (GST) rate cuts may already be factored into stock prices, according to Nitin Raheja, Executive Director – Head Discretionary Management, Julius Baer Wealth Advisors.

In a conversation with ET Now, Raheja said while several consumer-oriented stocks have already rallied 10–20% following the GST reset, the real impact will be visible over the longer term as lower tax rates combine with other structural tailwinds.

GST cuts and consumption outlook

“The festive season is very important for India’s earnings growth,” Raheja noted. “Markets have given virtually no return over the past year, primarily due to a slowdown in GDP and consumption. With GST cuts, low interest rates, low inflation, and earlier income tax changes, we should now see a strong revival in demand, particularly in the lower-income segment that has been under stress.”He added that the upcoming festive season will act as a litmus test for demand recovery. If consumption revives meaningfully, it could drive earnings momentum into FY27, supporting valuations that have already adjusted to slower economic growth over the past year.

Market performance and investor sentiment

Over the last 12 months, benchmark indices have largely remained range-bound, weighed down by muted earnings growth and weak consumption trends. However, structural reforms—including GST rationalization and regulatory clarity in key sectors—are expected to improve sentiment.Raheja emphasized that investors should not view the GST cuts as a one-off rally trigger but as part of a longer-term consumption story. “This is a trend that will play out gradually over time, not just in one or two quarters,” he said.

Sector spotlight: Insurance in focus

While autos, tyres, and consumer staples have been the immediate beneficiaries of GST rationalization, Raheja sees insurance as a medium- to long-term structural story.

“India remains an underinsured nation. Beyond GST cuts, the real game-changer for insurers has been regulatory clarity after a period of disruption. That overhang is now largely behind us, making insurance an attractive part of core portfolios,” he explained.

He believes rising awareness, improving penetration, and supportive tax policies will ensure consistent growth in insurance premiums over the coming years, making the sector a steady compounder for investors.

Key drivers ahead

• Festive season demand: Consumer spending in the upcoming festive months will be crucial in determining near-term earnings momentum.
• Macro tailwinds: Low inflation, accommodative interest rates, and earlier tax cuts are expected to support household consumption.
• Insurance growth: Long-term under-penetration and improved regulations make insurance a structural growth theme.
• Market valuations: While many consumer names have already rallied, earnings recovery could provide further support in FY27.

Outlook for investors

Raheja advised investors to focus on core consumption and insurance while maintaining a long-term perspective. “The near-term excitement may already be priced in, but the structural story remains intact. For investors willing to look beyond short-term volatility, sectors like insurance offer strong compounding potential,” he said.

As India enters the festive season, all eyes will be on consumer demand recovery. If the expected pickup materializes, it could mark the start of a stronger earnings cycle and help markets break out of their year-long consolidation phase.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)