Professional view on markets: Vivek Rajaraman, Govt Director, Head – Consumer Advisory, Waterfield Advisors, stays constructive on broader markets. He believes robust fund flows from DIIs and the revival of FPI flows can preserve the Indian inventory market buoyant. In an interview with Mint, Rajaraman shares his views on the potential affect of the US-China commerce deal on India, the present narrative about defence, PSU and railway sectors and funding technique for the following one to 2 years. Listed below are the edited excerpts of the interview:
Do you suppose the Indian inventory market might scale a contemporary excessive within the subsequent few months?
The home market reacted to a very good outcomes season within the final quarter, with broad market earnings going up practically 15 per cent YoY.
Going ahead, earnings estimates appear secure, and macro fundamentals like GDP development, regular inflation, and manageable deficits help development.
We have to be careful for international elements similar to geopolitical tensions, tariff-related disruption of provide chains, and inflation.
Contemplating all these, markets are at the moment barely over long-term valuations, each on a price-to-earnings and price-to-book foundation.
If there is no disruption, robust fund flows from DIIs and the revival of FPI flows can preserve the markets buoyant.
Do you suppose there will likely be an elevated danger of overseas capital outflow from the Indian market within the case of a US-China commerce deal?
Whereas capital motion out of India and into China stands out as the fast narrative, the difficulty is extra complicated.
From China’s standpoint, their financial restoration post-stimulus and up to date successes in AI have elevated their enchantment.
The tariff truce will even take away a number of the benefit for manufacturing in India beneath the ‘China plus one’ technique.
Therefore, there could also be a short-term enhance in FPI flows to China. Nonetheless, India’s structural development trajectory stays intact.
Indian companies have additionally targeted on sectors much less affected by India-China commerce dynamics (e.g. prescribed drugs, IT companies, and so forth.).
We have now additionally seen FPIs come again to the Indian markets over the previous few months and witness a robust rally and a secure forex.
India’s development and inflation dynamics look beneficial. What’s your expectation of the RBI’s rate of interest trajectory?
The RBI Governor, Sanjay Malhotra, in his speech put up the Financial Coverage Committee determination on sixth June, decisively acknowledged the change in stance from accommodative to impartial.
This clearly alerts that there will likely be no additional price cuts till knowledge emerges to help them.
The discount in price cuts impacted the yields of cash market devices and short-duration bonds greater than long-term bonds, resulting in a steepening of the yield curve.
Nonetheless, longer-term charges elevated barely, steepening the yield curve.
Whereas we are able to see some moderation within the 10-year charges, we count on this steepness of the curve to stay for the rest of the yr.
What’s your tackle the present narrative in regards to the defence, PSU and railway sectors?
The longer-term imaginative and prescient for the defence business in India is bold. The plan prioritises self-sufficiency after which management in key areas the place we are able to construct capabilities.
In fact, the present manufacturing ecosystem is dominated by the general public sector, which accounted for practically 70 per cent of all defence manufacturing in FY25.
Nonetheless, the personal sector’s share has steadily elevated from 14 per cent in FY17 to 21 per cent in FY25.
This has additionally corresponded with a 7-8 per cent development within the defence price range since FY20. We see this sector getting plenty of focus.
PSUs, normally, catch the market’s consideration infrequently and take part in a broad-based rally.
We will likely be very selective about this phase, relying upon the attractiveness of the sector, the standard of the corporate, and the valuation.
What must be our funding technique for the following one to 2 years?
We stay constructive on broader markets. Worries round reciprocal tariffs have receded to an extent, and we see the main target shifting to bilateral commerce treaties.
Indicators of a restoration in discretionary consumption demand ought to begin to change into seen as the results of financial easing start to take maintain.
For buyers who’re constructing fairness positions, we advise a valuation-based deployment plan to succeed in the strategic weight within the portfolio in an affordable timeframe.
For fastened earnings, construct a core portfolio across the three to five-year maturity bucket.
We are able to benefit from the brand new fund classes accessible to get higher post-tax returns. Based mostly on danger budgets, we are able to add to higher-yielding bonds instantly or through funds.
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Disclaimer: This story is for instructional functions solely. The views and suggestions above are these of particular person analysts or broking firms, not Mint. We advise buyers to test with licensed consultants earlier than making any funding choices, as market situations can change quickly, and circumstances might differ.
