The Reserve Bank of India's decision to cut rates will be the key trigger for an uptick in consumption, which is currently stuck in a trough, according to Dinshaw Irani, the CEO and CIO of Helios Capital Management.
“The demand cycle is unlikely to pick up meaningfully until interest rates begin to decline. This is when both consumer sentiment and spending will improve,” Irani said in an interview with NDTV Profit.
Although market watchers expected consumption to hit rock bottom in the September quarter, "looks like we have not hit the bottom yet," he said. Irani expects the rate cut cycle to begin early next year, paving the way for a gradual recovery. “We are looking at mid-2025 for a full-fledged consumption revival. Until then, we should be prepared for muted growth,” he said.
The consumer, retail, and discretionary sector has delivered a mute performance in the past two quarters due to a decline in urban spending offsetting the rural recovery. And looking at the advanced numbers shared by some consumer companies, it appears there is bad news still, according to Irani.
According to him, the best-case scenario now points to a bottoming out by December, a trough in March, and a gradual recovery starting in June, contingent on the RBI's actions.
Irani also tied the rate cut cycle to stock market performance. “Markets will start pricing in rate cuts well in advance. When rates come down, liquidity improves, and that is a direct trigger for equities to perform better,” he said.
On the global front, Irani shared his views on the potential impact of Donald Trump's re-election bid in the United States. “When Trump returns, we could see heightened volatility globally, and India won't be immune to that. His policies on trade and tariffs have always had ripple effects,” he remarked.
However, Irani sees a silver lining for India in the long run. India's fundamentals remain strong, and once the external uncertainties subside, the country will be a favoured destination for investments.
Dinshaw Irani On Top Sectors For 2025, Trump Effect And More | Watch
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