The market had a rather short-lived reaction if you will to the RBI policy.
Varun Goel: Our sense is this frontloading of monetary easing by 100 basis points of rate cut will go a long way in ensuring there is a strong cyclical recovery as far as India is concerned and if you combine it with one lakh crores of tax cuts that the government has given, we look set to see a significant rebound in economic growth. So, our sense is cyclical parts of the economy be it banking, NBFCs, real estate, capital goods, these are some of the sectors which will benefit from the significant easing that has being carried out and hopefully FY26 should be the year of revival of earnings growth after a very muted FY25 where benchmark earnings grew in low single digit. We believe this year the earnings will revert to the long period average. We expect somewhere between 12% to 13% earnings growth for Nifty 50 companies and hopefully, the outlook for the economy and the market remains positive.
Given the kind of volatility and the sector churn we are seeing in the market right now, how is your portfolio placed? What is the positioning and how are you approaching some of these very volatile spaces like financials that have been doing very well over the last couple of weeks but are seeing a little bit of a profit booking today?
Varun Goel: If you look at for the next 6- to 12-month perspective, we expect a strong earnings growth. NBFCs clearly should be the biggest beneficiaries early on because we do not expect any NIM compression for them. First of the year the banks should see some NIM compression but that should start coming back as the rates get passed to the borrowing side also. So, broadly second half of the year should see strong earnings growth even from the banking space. So, we remain quite constructive on the overall lending ecosystem.
If you look at the overall non-lending side also be it capital markets, exchanges, depositories, that will also benefit from a significant revival in the capital market activity. As I was mentioning the capital goods space also looks set for a strong earnings momentum. Our sense is this cycle has much longer legs.
So, I was saying cyclical parts of the economy should continue to do well. Our sense is even on the real estate side we are still in the mid cycle and hopefully we should see another two to three years of strong volume growth led by a decent pricing action. So, overall, the economy should benefit as the mortgage payments, as your monthly loan payments for your car loans, auto loans, personal loans comes down, the economy should see a revival in economic activity and most of the cyclical sectors should benefit.
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