Expert view: Sandip Bansal, Deputy CIO at ASK Investment Managers, believes earnings may pick up from H2FY26 due to good monsoons, higher system liquidity, lower interest rates, benefits from reduced income taxes, lower GST rates and lower inflation. In an interview with Mint, Bansal shared his views on Trump tariffs, short-term risks for the Indian stock market, government reforms, FPIs, and expectations from the US Fed. Here are edited excerpts of the interview:
What is your short-term outlook for the market? Do you expect to remain rangebound this year?
Markets could be choppy in the short term and are likely to be influenced more by macro news flows, such as those surrounding US tariffs or government reform measures.
Near-term earnings are expected to be weak, and valuations are at ten-year average levels, with the Nifty trading at about 21 times one-year forward P/E multiple.
Q2 earnings are likely to be muted due to demand postponement on the back of announced GST rate rationalisation.
However, earnings are expected to pick up from H2 FY26 due to multiple drivers, including good monsoons, higher system liquidity, lower interest rates, benefits from reduced income taxes, lower GST rates, and lower inflation, which will enable consumers to undertake higher discretionary spending.
So, markets could derive positivity from the festive season onwards, as confidence in the underlying demand returns.
The tariff overhang is keeping the bulls under check. Do you think the 50% US tariffs are significantly long-term negative for the Indian economy?
Indian exports to the US are about $90 bn, and more than half of them could be affected by the tariffs.
While specific sectors could remain impacted for a while, the overall GDP impact is likely to be less than a per cent, which seems manageable over time. India would need to find other export destinations.
A trade deal with the UK is done, with the EU in process, and negotiations are on with other countries as well. Obviously, the focus now needs to be on the speedy conclusion and implementation of these.
Relations with China seem to be on the mend, which should aid growth in the manufacturing sector. The government has announced GST reforms and will take further measures to support growth.
All of the above can probably offset the impact from lower exports to the US. Also, it is quite possible that, based on negotiations or specific developments, US tariffs on India will be brought down.
What are the major short-term risks for the Indian stock market?
Markets will be watchful of the effect of US tariffs on exports and if more sectors are brought under their ambit.
Additionally, there are risks of dumping from China, as their exports to the US are also being impacted.
If domestic demand isn’t strong during this festive season, especially on the urban side, which has been weak for a while, the markets will be disappointed.
A pick-up in credit growth is also important for the overall earnings trajectory, and delays therein will have an adverse impact.
The Indian government has signalled that major reforms could be in the offing. How can investors reap the benefits of these reforms?
In the near term, sectors where GST rate cuts are likely to benefit include consumer discretionary, autos, and cement.
Government reforms could focus on aspects such as ease of doing business and the Make in India initiative. Hence, the manufacturing sector could be a big beneficiary, and, in our view, sectors like infrastructure and energy are also likely to gain.
Why is the “India story” narrative not attracting FPIs? What can bring FPIs back to the Indian market?
Earnings growth in India has been slowing down and has been below expectations.
This, coupled with the premium that Indian markets have been trading at versus other emerging markets, might not have been attractive to FPIs. Also, geopolitical and tariff-related news flow has been adverse in recent times.
However, domestic investors have more than compensated for the FPI outflows. Additionally, we believe that as earnings growth is passed through, FPIs may also return.
Indian markets have considerably underperformed their peers over the past year, and as a result, the valuation differentials with the peer group have narrowed.
What is your anticipation for the US Fed rate cut? What could it mean for emerging markets like India?
Markets are expecting a 25-basis-point rate cut at the September meeting of the US Fed, with an over 80 per cent probability. In India, the last inflation print was at an eight-year low.
The GST cuts should also have a deflationary impact. The RBI has been growth-supportive, and with the US rate cuts, rates in India could also go down, which is growth-positive.
Lower US rates are expected to increase global risk appetite, leading to increased flows to emerging markets, including India.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
