India’s booming 8% GDP growth masks a deeper challenge, warns Jimeet Modi, Founder & CEO of SAMCO Group. In an interview with LiveMint, Modi argues that “India needs a rate cut now because the real interest rate… has become excessively tight and is choking nominal GDP momentum,” calling for urgent policy action even as markets eye a potential Santa rally and shifting sector leadership. Edited excerpts:
India just posted an impressive 8% GDP growth. Given this strength, do you believe the RBI should consider cutting rates now, or maintain its current stance?
India needs a rate cut now because the real interest rate which is highest in more than a decade at 5.25% has become excessively tight and is choking nominal GDP momentum. Real growth is strong, but nominal is barely keeping pace. This hurts tax collections, corporate earnings and debt sustainability.
With inflation almost crushed, keeping rates high risks a deflation scare and slows capex at a time when fiscal space is limited and the government cannot spend aggressively. Now cutting rates at a time when rupee is already in nervous nineties might be an acceptable trade-off for the RBI. The low inflation will cushions the impact of rate cuts and benefit exporters. Cutting rates will restore nominal firepower, keep debt dynamics healthy and protect India’s growth trajectory when it matters the most.
Historically, December often sees a Santa rally. Do you expect a similar trend this year, and what could drive or derail it?
December has been one of the best months for markets over the last 20 years. It has ended on a positive note 14 times out of 20 with an average gain of 2%. Large caps have mainly held our markets well while the mid and small caps have been beaten down badly. Nearly two-third of the top 750 stocks by market capitalisation are still trading below their September 2024 highs. So one can expect the rally in largecaps to sustain in December but it would be interesting to watch out if the mid and smallcap stocks can participate…after all that’s where majority of retail investors are stuck.
What are your Nifty and Sensex targets for December-end and for March 2026?
Nifty could trade in a range of +/- 500 points from 26200 by December end while the range will expand to +/-1000 points till March 2026. Overall, markets are likely to remain range-bound until there is a major catalyst in terms of sales and earnings growth across majority of sectors. A few events like the Union Budget could also give cues and act as a catalyst for the markets early next year.
The Nifty Smallcap index fell 3% in November. Should investors view this as a buying opportunity or a signal to remain cautious?
The 3% drop in the Nifty Small cap index is a clear signal to stay cautious, not a rush-to-buy moment. Small caps have delivered outsized returns and now trade at stretched valuations, making them vulnerable to volatility. In contrast, large caps offer a far better risk-reward setup owing to their business fundamentals, protection from volatility and valuation comfort compared to mid and small caps. For near-term stability and safety, shifting towards large caps is prudent. Long-term investors can still accumulate quality small caps on dips as it is known to deliver returns in a 5 to 7 year cycle.
Which sectors do you believe offer the strongest investment potential for the remainder of the year?
We are in the middle of a commodity bull cycle which began with gold and silver which was followed by a rally in their miners. Now the leadership seems to be changing to base metals. Their miners are likely to lead on the back of operational leverage. This will likely to be followed by rally in oil and gas and their explorers. It will finally culminate with a rally in agricultural commodities and related stocks. Thus, there is a strong investment potential in metal stocks followed by energy stocks. Another sector I think that can do well is pharma, as the sales and earnings growth is picking up.
Do you foresee a meaningful revival in the PSU space in 2026?
A meaningful revival in the PSU space in 2026 is certainly possible, but it will depend on how a few key variables evolve. Fundamentally, PSUs have strengthened through improved governance, healthier balance sheets, and better capital discipline, and segments like defence, railways and utilities are benefiting from sustained policy support. However, the pace of revival will be shaped by broader market conditions and the government’s capex trajectory.
FII selling has eased recently. Do you expect foreign investors to turn net buyers in 2025? What factors will influence their flows?
Foreign investor activity has remained volatile through 2025, and based on SEBI’s daily FII activity data, it appears unlikely that FIIs will turn net buyers for the full calendar year. In Q1, FIIs recorded heavy outflows of over ₹1.16 lakh crore, followed by a modest recovery with net buying of ₹38,674 crore in Q2. However, selling resumed sharply in Q3 with outflows of ₹76,619 crore. Although Q4, up to 3 December 2025, has shown meaningful improvement with FIIs turning net buyers since October, the magnitude of inflows required to offset the earlier large-scale selling remains substantial.
Given this backdrop, a full-year reversal to positive net flows looks challenging. FII behaviour in 2025 will depend on global risk sentiment, the trajectory of U.S. interest rates, movements in the USDINR, and foreign investor allocation towards emerging markets. Domestically, stable GDP growth and resilient corporate earnings may support inflows, but the earlier heavy outflows create a high base that makes a complete turnaround difficult within the current year.
The IPO market remains active, but concerns persist around valuations. With profitability improving, how should investors approach new listings?
The Indian IPO market remains active, but investors need to be more valuation-conscious as listing gains continue to soften. The primary risk today stems from pricing rather than demand. Although the market is rewarding well-known names, many of these companies face uncertain long-term prospects, and investor interest is often driven by Grey Market Premium (GMP). This creates a material risk, as an IPO allotment followed by a listing that fails to reflect the GMP can result in immediate value erosion.
Subscribing purely on the basis of reputation should also be avoided, as large issuers often arrive at elevated valuations designed to provide exits to existing shareholders. Even improving profitability must be examined closely to ensure it arises from core operations and not from tax credits or accounting adjustments. In the current environment, disciplined diligence and selective participation are essential and recommended.
What are your key expectations from the upcoming Budget?
The first and the foremost expectation from the finance minister in the forthcoming budget is that there should be no negative surprises in the budgetary announcement and the status quo should be maintained. The Ministry of Finance (MoF) should concentrate on enhancing Capital Expenditure and outlay in addition to maintain the fiscal discipline. It is also expected that going forward the tax regime for the capital market will either remain stable (No negative surprises) or such taxes will be lowered. This will be a great booster for the market.
In order to revive the consumption, considerable tax relief for the middle-class is sought to be announced in the Budget. India’s manufacturing sector needs a big push to bring it to the global parity. The government should aggressively push its “Make in India” programme to give manufacturing sector a suitable direction by launching Production-Linked Incentives (PLI) for more industrial sectors.
What is the one piece of advice you would give to new investors entering the markets at this stage?
Anyone who is entering equity markets afresh, should learn to keep expectations low. Equities have a track record of the best CAGR performance over long periods of time. However, there are months and years where they do nothing. We are in one such period, when BSE Small cap and Mid cap indices have given no returns in the last 18 months. This can be agonising for new investors who have only seen markets go one way up. So, the lesson to new investors right now is, to stay grounded, have patience and remember that markets are cyclical…this too shall pass. Hang on!
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
