Nifty Likely To See Christmas Rally Amid Double-Digit Q3 Growth And Trade Talks, Says Saurabh Mukherjea

The Indian equity markets are expected to see a rally in the coming weeks, aided by multiple factors, including the potential progress in Indo-US trade negotiations, the impact of GST rate cuts and Q3 earnings, among others, according to investment expert Saurabh Mukherjea. 

Benchmark Nifty 50 is expected to see a year-end uplift with a strong Christmas rally, as the December quarter is likely to deliver double-digit growth for the first time in several quarters, Saurabh Mukherjea, Founder and CIO of Marcellus Investment, said on Friday.

Speaking to NDTV Profit, he emphasised that while the September quarter showed 8 to 9% earnings growth, the third quarter will see an upheaval driven by policy support, impact of GST reforms and rate cuts by the Reserve Bank of India (RBI).

“I believe the December quarter will be a double-digit quarter. With the GST cut and greater policy proactivity from the government in stoking consumption, there is reason to believe the earnings downturn of the past two and a half years is behind us. If the US-India free trade agreement comes on top of that and the RBI implements a rate cut, there are plenty of reasons for the market to have a strong Christmas rally,” the ace investor noted.

According to Mukherjea, the sectors most likely to benefit in the next growth cycle are IT, auto and FMCG/durables. 

"I think there are three big parts of the market that could move favourably. Firstly, the IT piece. The Federal Reserve has started cutting rates and IT stocks respond very favourably to this. Secondly, the auto piece is obviously rate-sensitive, given the amount of debt Indian households have. If you get GST cuts and then rate cuts from the RBI, the auto sector should start moving upwards. Thirdly, both FMCG and durables…hopefully we’ll see upgrades there as well,” he explained.

On market expectations amid the Bihar elections, Mukherjea commented that the market outcome aligns broadly with opinion polls, though polls may have been slightly over-optimistic. 

“It looks like the result that the opinion polls had suggested. Perhaps the opinion polls were a little over-optimistic, but I think the main thing is if the Bihar Assembly elections are out of the way, we can look forward to the United States-India free trade agreement…,” he said.

According to Mukherjea, the Bihar election results may influence fiscal spending, which is of more interest to the bond market than the equity market.

“The bond market might be a little bit more interested in the margin of victory, because if the results are tight, then that could lead to some more fiscal spending next year by the incumbent government in Delhi,” he noted.