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Equity market:

• India is currently witnessing the confluence of the best macro and micro tailwinds with ~8% GDP growth, moderating inflation, easing 10-year G-sec yield, stable currency, and resilient corporate earnings so far
• Nifty is trading at a 12-month forward P/E ratio of 21.6x, which is in line with its long-period average even as broader markets trade at expensive valuations
• The capex cycle is already turning around, and government related infrastructure spending should get a boost. Private sector is leading the revival of capex spends
• Consumption has seen a turn around in the rural segment. A good monsoon, better kharif sowing and the festive season is indicative of further boost in consumption
• Investment-driven growth will be pivotal, with the government’s emphasis on infrastructure, housing, energy transition, and manufacturing playing a crucial role
• In current phase of consolidation and higher valuations, it is important to be spread across market caps

Debt market:

• Current Interest Rate Environment – Interest rate cuts have started across most economies and even the US has joined the fray. Expect gains in bonds to be staggered and not in a straight line
• Bond Yields to fall further given fiscal prudence, lower market borrowings and inflows through inclusion in JP Morgan Global Bond Indices (estimated $25 bln) and in Bloomberg EM indices (estimated $5 bln)
• Inflation to head lower as per expectations. We expect this rate cycle to be shallow and expect 50 bps of rate cuts by RBI in this rate cycle.
• Banking liquidity to remain comfortable in the near to medium term
• Ideal balance between “carry’ opportunity & duration risk

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