Quote on the Resilience of the Indian Economy
“Indian economic activity remained upbeat in Jan: The high frequency indicators for January suggest that growth continues to hold up well. The effect of tax cuts on demand is clearly visible especially on vehicle registrations which continue to post strong growth for fourth month in a row (GST cuts became effective on 22nd September 2025). Power demand too continues to hold up and GST collections seems to have stabilised.”
“Looking ahead, India’s growth is likely to be steady as Government continues take up reform measures. Monetary easing too will continue to boost demand this year as monetary policy works with a lag. Several trade deals, especially those with the EU and US, will also support growth going forward. Overall, medium-term outlook for the Indian economy seems optimistic, in our view.”
Quote on Fiscal Consolidation and Budgetary Discipline
“For FY27, the Government adhered to fiscal consolidation path by targeting fiscal deficit of 4.3% of GDP (vs 4.4% of GDP in FY26) and reiterated its commitment to bring down Central Government debt to GDP to 50% (+/-1%) by FY31. Government has assumed tax revenue growth of 8% YoY in FY27 – compared to a nominal GDP growth assumption of 10% – which appears realistic.”
“According to revised estimates for FY26, the Government has indicated that it will adhere to the fiscal deficit target of 4.4% of GDP despite shortfall in tax revenue. This will be achieved through a combination of expenditure cut (largely revenue expenditure) and higher non-tax revenue.”
Quote on Inflation and the New CPI Series
“CPI inflation is likely to rise from hereon but will likely remain contained and close to RBI’s target. It is worth noting that Ministry of Statistics and Program Implementation (MoSPI) will come up with new CPI series (base year 2023-24) from this month onwards which will rejig the weights of the CPI components. The weight of food items is set to decrease in the new series while that of non-food items will go up.”
Quote on Global Trade and Monetary Policy Shifts
“Global growth continues to hold up well led by the US. However, uncertainty remains high amidst geopolitical realignments and risk of flare ups. India and US reached an agreement on the trade deal where US will lower tariff from 50% to 18% though details on the same are awaited. The US President’s announcement that Kevin Warsh will replace Jerome Powell as Fed chair adds another layer of uncertainty regarding Fed’s policy going forward.”
Quote on Equity Market Valuations and Strategy
“Over medium to long term, we remain optimistic on Indian equities considering key trade deals, attractive domestic growth outlook, healthy corporate profitability, and supportive pro-growth policies like income tax and GST relief to consumers and renewed reform momentum. However, near-term risks include risk of geo-political flare ups and cyclical moderation in corporate earnings.”
“As of January 30, 2026, the valuations of all sectors except FMCG, Consumer discretionary and Private Banks are trading at a premium to historical average… Given the global uncertainties and aggregate valuation being higher than historical average, the importance of stock selection increases even more.”
Quote on Debt Markets and Yield Outlook
“Overall, in our view, yields on the shorter end are likely to have a downward bias as RBI ensures sufficient liquidity, inflation remains close to target and Government expenditure at the end of the fiscal year augments liquidity. However, yields on the longer end is likely to remain under pressure due to large supply and muted demand from long term players.”
“The recent liquidity-driven repricing has resulted in short to medium term CD / bond yields trading at attractive spreads over the policy repo rate/Gsec. Hence, the investment in short duration fund category of schemes appears to be a good investment opportunity.“
