Ajay Bagga says GST tax cuts might spark market rebound, increase demand

Market skilled Ajay Bagga believes Indian markets might have already bottomed out and might be poised for restoration regardless of latest weak point. He famous that Q1 downgrades had been among the many lowest in eight quarters, suggesting resilience. Whereas the March quarter was initially anticipated to mark the cycle’s backside, contemporary alerts point out inexperienced shoots are rising.

The important thing catalyst, he emphasised, might be the upcoming GST Council assembly.

“See, in the event you take a look at the general Indian financial system, about 180 lakh crores is our consumption basket, out of which about 150 lakh crores is the taxable half. Now, if we get a 4-5% consumption tax minimize on that by finish of this month and that leaves about six months within the 12 months, you might see a lift of about one lakh crores in consumption and that units off a virtuous cycle as a result of as individuals have extra money of their pocket, they’ll both save, make investments, or they’ll eat. Largely it should go into consumption,” he advised ET Now in an interview.

On the rupee’s document low on Friday, Bagga defined that the Reserve Financial institution of India (RBI) didn’t intervene this time, not like earlier within the week when it supported the forex. The weak point, he stated, was largely because of month-end greenback demand, oil fee settlements, and the upcoming US Labor Day vacation, which induced a bunching up of transactions. With Wednesday being a vacation in India, RBI stayed out, permitting the market to seek out its personal degree.

“It was extra a case of RBI letting the market discover its degree, however RBI may have some degree in thoughts and you will note financial institution intervention coming again. Monday, Tuesday they did; at the moment that intervention was missing and due to very sturdy greenback demand principally due to the oil funds and month finish and the US vacation, all that bunched up, in any other case now we have been capable of soak up this Rs 2,000-6,000 crores of promoting in FIIs and secondary market,” he stated.

He additionally highlighted the broader geopolitical angle, noting that forex depreciation is commonly used as a response to tariff wars. Permitting the rupee to fall by 3–5% might assist offset tariff pressures, a technique just like what was noticed in 2019. Bagga added that India should additionally carefully monitor the actions of different rising markets. As an illustration, China has often intervened to catch short-sellers and stabilize its forex. On the surge in gold and silver costs, Bagga defined that traders are transferring away from the US greenback, which has misplaced its enchantment because of coverage uncertainty below President Donald Trump.

One other key driver is the US Federal Reserve’s anticipated price minimize on September 17, which markets have already priced in.

With inflation anticipated close to 2.9%, decrease rates of interest make non-yielding belongings like gold and silver extra engaging. Moreover, central banks worldwide are steadily diversifying away from the greenback by growing gold reserves, additional boosting demand, he stated.

On the home entrance, Bagga highlighted the strengthening consumption theme in India following Prime Minister Narendra Modi’s GST bulletins. Quick-moving client items (FMCG) firms, although costly at 40–50 occasions valuations, stay engaging because of their excessive returns, damaging working capital fashions, and constant money flows.

Whereas volumes had stagnated previously two years, indicators of revival are evident. Rural India, supported by elevated liquidity in family pockets, is driving sturdy demand, whereas city consumption—beforehand lagging—is about to achieve momentum from GST-related tax cuts. Bagga estimated {that a} 3–4% minimize on India’s Rs 150 lakh crore taxable consumption base might inject vital buying energy, reinforcing a virtuous cycle of progress.

“With the GST minimize, that client class of 12-14 crores on the high finish, they are going to get a giant increase and these firms will actually get a lift. As I stated, the entire image is about 150 lakh crores getting a 3% to 4% tax minimize which performs out over the following six months by way of consumption. However you might see that as that is orchestrated together with the beginning of Navaratri, then Diwali…” he stated.

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