Regardless of world uncertainties and near-term volatility, Pathak stays optimistic about India’s structural progress story and highlights Generative AI, Defence, and Semiconductors as key high-conviction funding themes for H2.
With rising enterprise adoption of GenAI, robust coverage push in defence manufacturing, and rising chip fabrication tasks, these sectors are poised to profit from each world megatrends and home reforms.
Pathak additionally sheds mild on valuations, FII flows, fee trajectory, and the perfect asset allocation technique for long-term buyers navigating a dynamic macro surroundings. Edited Excerpts –
Q) We closed Could on a excessive word however witnessed some volatility in June – is it geopolitical considerations weighing on sentiment?
A) Sure, whereas Indian equities ended Could on a robust footing, June has introduced noticeable volatility, primarily pushed by heightened geopolitical tensions.
Considerations over potential provide disruptions in key commodities, escalating conflicts within the Center East, and uncertainty throughout main world economies have began to weigh on investor sentiment.
That being mentioned, this volatility seems to be extra sentiment-driven than basically structural. India’s core macroeconomic story stays strong, supported by secure consumption traits, wholesome company earnings, and resilient home demand.
Nevertheless, it’s vital to not overlook India’s vulnerability to crude oil worth shocks. As a rustic that imports the majority of its oil wants, any sustained enhance in crude costs can exert upward strain on inflation, widen the present account deficit (CAD), and create short-term headwinds for fairness markets. We’ve seen early indicators of this enjoying out throughout June.
Q) As we’re about to finish 1H2025, what are your expectations or assumptions for the remainder of the yr?
A) As we close to the top of H1 2025, the outlook for the second half stays constructive however not with out headwinds. India’s home progress engine continues to carry agency, supported by sturdy consumption, government-led capex, robust tax revenues, and bettering company fundamentals.
Earnings visibility is strengthening, notably in banking, capital items, industrials, and shopper staples, with the BFSI sector prone to keep momentum on the again of secure credit score demand and wholesome asset high quality.
From a market standpoint, whereas valuations particularly in mid and small caps seem stretched, they could possibly be justified if earnings progress persists.
Therefore, selective, bottom-up inventory selecting is anticipated to outperform broader market methods. I anticipate average however regular fairness returns in H2, with intermittent corrections creating favorable entry factors.
Q) Are there any new or current themes which are prone to do nicely in 2H2025?
A) Sure, the second half of 2025 is anticipated to profit from world megatrends and India’s ongoing structural reforms, providing a number of high-conviction funding alternatives.
One key theme is the fast adoption of generative AI and automation, with over 64% of Indian enterprises prioritizing GenAI initiatives. BFSI is main this shift, creating long-term potential throughout tech, cloud, and automation platforms.
Home consumption stays resilient, bolstered by middle-class tax aid and bettering rural demand. That is favorable for monetary shares, particularly with credit score progress selecting up and rates of interest stabilizing.
Moreover, India’s give attention to semiconductors and defence know-how is strengthening, with new chip fabs underway and defence manufacturing projected to develop 15–17% in FY26, backed by a ₹1.92 lakh crore capex push.
Lastly, sectors like healthcare and shopper staples are positioned for regular progress, supported by secure demand and managed inflation.
Q) Geopolitical considerations weighed on crude oil previously few weeks. How do you see crude oil shifting within the close to future and what could possibly be the doable influence on earnings and GDP progress?
A) Crude oil costs have remained risky in current weeks. Given the geopolitical fragility and constrained supply-side flexibility, the outlook for crude oil stays cautiously upward biased within the close to time period, though moderated by demand-side uncertainty from a sluggish world restoration and rate of interest sensitivities in key economies just like the US and China.
India, which imports greater than 85% of its crude oil necessities, is especially susceptible to such worth shocks.
Any disruption in provide chains or escalation in regional conflicts can considerably push up oil import payments, thereby pressuring the nation’s present account deficit (CAD) and financial place.
For example, in keeping with ICRA, a $10/bbl enhance in common crude oil worth throughout FY2026 can develop India’s internet oil import invoice by roughly $13–14 billion, which might widen the CAD by practically 0.3% of GDP.
Larger crude costs even have a cascading impact on home inflation, particularly by means of larger transportation and manufacturing prices. This, in flip, compresses company revenue margins notably in oil-intensive sectors akin to aviation, logistics, FMCG, and manufacturing finally impacting earnings progress.
Firms with excessive enter prices might discover it difficult to move on the elevated burden to shoppers in a demand-sensitive surroundings. So, if oil stays above the $80/bbl mark for a sustained interval, downward revisions to GDP forecasts could possibly be warranted.
Q) By way of valuation consolation – which sectors are in your radar?
A) We’re discovering sectors like IT companies, choose prescribed drugs, and utilities very engaging as on right this moment. The IT sector, particularly mid-tier names, gives affordable valuations after the current correction and may benefit from potential restoration in world demand.
Pharma is engaging from a defensive standpoint with regular earnings visibility and affordable pricing. Utilities, notably energy and vitality transition performs, present secure money flows and are buying and selling at truthful valuations contemplating their long-term progress prospects.
Moreover, pockets inside capital items and choose auto ancillaries additionally appear fascinating as they provide a mixture of affordable pricing and structural progress drivers.
Q) How are FIIs India amid falling rates of interest globally?
A) In Could 2025, India attracted $2.29 billion in bond inflows, highlighting its position as a key vacation spot inside Asia in the course of the world rate-easing cycle. Fairness flows additionally rebounded sharply in March and April, coinciding with expectations of coordinated easing by central banks.
Overseas Institutional Traders (FIIs) look like recalibrating their outlook on India positively as the worldwide financial surroundings transitions right into a softening part.
With expectations of rate of interest cuts in developed economies just like the U.S. and a dovish bias from the Reserve Financial institution of India (RBI), India’s relative macro stability and return potential have gotten extra engaging to world buyers.
I really feel, whereas fee cuts might not instantly translate into sustained shopping for, the broader development signifies growing consolation with Indian belongings particularly in rate-sensitive and domestic-facing sectors.
Q) If somebody plans to allocate say Rs 10 lakh (30-40 years) in 2H2025 – ought to they put recent cash to work? What’s the excellent asset allocation?
A) Sure, recent investments might be made in 2H2025, ideally by means of staggered allocations. Timing the market is much less important for a 30-40 yr horizon; the bottom line is to stay invested with self-discipline and diversify successfully throughout asset lessons.
Whereas markets have seen some volatility not too long ago on account of world components, long-term buyers ought to view intermittent corrections as alternatives to build up high quality belongings.
So far as a super asset allocation is worried, long-term buyers can think about larger fairness weights (50–60%), with tactical use of gold and alternate options.
Q) How is the speed trajectory wanting from the RBI? Do you suppose the front-loaded 50 bps lower was sufficient to spice up consumption?
A) I believe this proactive and front-loaded fee discount seems to have given an preliminary increase to shopper demand, notably in sectors like retail lending and auto financing.
RBI has positively made a decisive transfer by decreasing the repo fee by 50 foundation factors to five.50% and in addition chopping the Money Reserve Ratio (CRR) by 100 foundation factors, injecting substantial liquidity into the monetary system.
The timing of this coverage adjustment was well-calculated, and it’s anticipated to help consumption progress. Nevertheless, the long-term effectiveness will rely closely on how easily the decrease charges are transmitted and whether or not banks keep a wholesome movement of credit score to debtors.
So, this may increasingly result in offering noticeable aid to shoppers by means of decrease EMIs and lowered borrowing prices. Additionally, extra quick optimistic impact on MSMEs, retail debtors, dwelling consumers, and people looking for gold loans, whereas large-scale personal investments might take longer to answer these financial changes.
(Disclaimer: Suggestions, strategies, views, and opinions given by specialists are their very own. These don’t symbolize the views of the Financial Instances)
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