Edited excerpts from a chat:

Given that the stock market has given near flat returns in the last one year, do you think that most of the time the correction is behind us and it is now time to be overweight equities and deploy spare cash?
The Indian equity market has gone through almost a year of time correction. Higher valuations to start with & disappointing earnings growth are the primary reasons for this time correction. Solid macro-economic stability with well controlled fiscal & current account deficits, lower inflation & interest rates and relatively stable currency saved us from sharp fall in markets. The issues which caused the growth slowdown like capex postponement, deficit liquidity & tighter lending are fully addressed in the past 6 months. Government & RBI, cognizant of the slowdown are trying to address the same through a barrage of measures like income tax breaks, interest rate & CRR cuts, GST cuts etc. We believe all these measures can bear fruits in H2, especially on a low base. As the earning growth comes back to double digit levels, we hope to see the market rejoicing.

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While going through this time correction, the Indian market has substantially underperformed other emerging markets, most notable being China(40-50% of underperformance vs. Chinese market). We also have underperformed most of the developed markets like Germany, US etc. Foreign ownership in the Indian market is at its lowest in the last 15 years after a spell of continuous selling. Domestic flows are holding up very well with seemingly structural patterns backed by macro outcomes & investor awareness.

Stitching all these points together, we believe the risk-reward ratio has turned decently favourable. One can deploy spare cash and increase equity exposure depending on his/her risk profile & asset allocation.

GST is being seen as the biggest trigger for the market in 2025. Would you agree? And how has your portfolio changed since the new GST rates have been announced?
Since the start of this calendar, we have been enthused by the concerted efforts undertaken by the Government & the RBI. Income tax breaks, interest rate & CRR cuts, clearing of government dues, turning of liquidity into surplus etc measures are already under work. On top of these, the boost from GST rate rationalisation can be a meaningful demand enabler. We were already overweight through auto, durables & consumer services like food delivery and quick commerce. Post GST announcement, we are looking at these pockets even more positively.

Auto is being the biggest sectoral winner of GST reforms. How would you play the auto cycle, which in itself is quite broad with tractors, ancillaries, CVs and PVs players?
Absolutely. The auto sector could emerge as a big beneficiary. It’s a discretionary purchase for a family & as the price reductions are substantial, can trigger the purchase decisions. Particularly lower price point vehicles were seeing muted demand for a few years now & sitting on a low base & latent demand. Low interest rates would also be helpful as almost 40-60% of vehicles, depending on category, are sold on finance schemes & EMIs would see meaningful reduction. The 8th pay commission which is supposed to be implemented from CY26 could also support the auto cycle over a couple of years to come.

IT has not only been the worst performing sector of 2025, but the outlook now looks more grim given the noise around the HIRE Bill. Is that a serious threat from a longer-term perspective? How much weightage are you giving to IT in your portfolios?
We have decent exposure to the IT sector in some of our funds, purely from a business cycle point of view & we are aware that it’s a kind of contra view in the prevailing market. Post this underperformance, valuations are on the lower side & margin of safety is decent particularly from dividend yield perspective. Many IT sector stocks are trading at 2.5-3% dividend yield. We believe the concerns around the US economy & AI are in the last leg post 3 years of downcycle. Noises like HIRE Bill & H1B visa etc have been there in the past as well from time to time. We would keep monitoring them but do not assign high probability to such issues. Ultimately the economic & business logic would prevail even in the worst case.

We will be having the Q2 earnings numbers flowing in a month from now. Do you think the September quarter would be the last of the single-digit earnings growth and we can expect double-digit growth from Q3 onwards?
Q2 earnings would be expectedly very weak & may not impact the market. We do believe that Sept quarter could be the last of the single digit quarter and from Q3 onwards there is more than fair chance of getting back in the double-digit earning growth trajectory.

Within the consumption basket, how would you go about picking winning stocks?
We are cognizant of the intense competition in most of the consumer product categories. New-age entrants, private labels & unorganised players are eating away serious market share from incumbents. Accordingly we are preferring distribution pipes such as quick commerce companies & retail chains. These companies are showing initial signs of path to profitability by exercising pricing power gained through strong value propositions to customers and exerting bargaining power, gained through scale vs the product suppliers.

Besides consumption and auto, which other sectors do you believe will lead the next leg of market growth, and what’s driving your conviction in them?
Incrementally we think the larger banks and few NBFCs/affordable housing companies would be able to capitalise on the economic pick-up through better credit growth & lower cost of funds. Valuations are reasonable in this pocket and these stocks could benefit from FII buying, if they wish to come back to India.

If you had Rs 10 lakh to invest in the market right now, how would you spread it across gold/silver, equities and debt?
Gold & silver does warrant allocation in each portfolio given indebtedness of US Government, geopolitics & tariff/ currency wars. However, one must not make a mistake of overallocation chasing the solid momentum of the past 3 years & invariably decent exposure to gold by most Indian families through jewellery etc. If one has a view that the present geopolitical situation, tariff & currency war etc are at their worst and can only improve from hereon, obviously gold’s upside would be capped to that extent. Probably gold price has probably already factored much of the worst outcome. Debt allocation could be used as an emergency & 1-3 years of expenses’ fund as well as an enabler to take advantage of volatility in other asset classes. Given the backdrop discussed at the beginning, we think investors can increase equity exposure within the boundaries of his/her asset allocation which has to be an outcome of risk profile, age etc.

Lastly, what’s the one contrarian idea you’d back for the next 12 months?
We have decent allocation to the IT sector in few of our funds. As discussed in one of the answers above, this can be a good contrarian idea at this point which can play out over the next couple of quarters. Three years of low cycle, solid business models, management & decent enough margin of safety in valuations provide us with enough conviction to back this call.

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