The growth of the government still pushes to think about markets, says Gautam Duggad

Despite a whole series of government measures aimed at stimulating demand and the growth and growth, including the rate reductions of RBI, tax reductions and the much-discussed GST relocation-hebben markets did not respond with the kind of enthusiasm that many expected. Gautam Duggad, head of research at Motilal Oswal Financial Services, explained the reasons behind this muted response in an interview with ET Now.

Foreign sales and valuations a drag
Duggad pointed out that ruthless foreign institutional sale has weighed heavily on sentiment. “In the last 20 months, and in calendar year 24 Plus the first eight months of calendar 25, foreigners have sold $ 15 billion, while the Domestics bought $ 123 billion last year – $ 63 billion and around $ 60 billion in the first eight months,” he said.

High ratings also contribute to the inconvenience. “The ratings of Nifty at about 21-22 times, although not exorbitantly expensive, and even midcap and small indices at 25 and 27 times, give some discomfort,” Duggad explained. With the operating result that hardly grows in FY25, stretched ratings seem to justify.

Profit growth hopes for the second half
Despite the challenges, Duggad remains hopeful for a profit recovery this year. “Now this year we have an expectation of approximately 8% to 10% profit growth. We hope that the sentiment will increase in the second half of the tax year, from 1 October, and then the market can at least yield the profit growth we expect this year,” he noticed.

He emphasized that the actions of the government- from tax cuts to liquidity infusion could reflect in the festive season, but until then the markets will probably remain stock and sector-specific.

Capex has played his role, now Focus is shifting to consumption
On what could stimulate the profit information, Duggad said that Capex had already supplied with mass expenses in the last five years. “We hadden een totaal CAPEX-budget van Rs 1,9 biljoen in 2019. We hebben bijna ergens in de buurt van 11 lakh crore bereikt. Dus dit is een groei van vijf en een halve tijd in de laatste vijf-zes jaar, en de overheid heeft terecht de focus verschoven van het budget van dit jaar van de capex naar de consumptie, ‘zei hij, het banken, en consumenten-en consumenten, en consumenten, en consumenten, en consumenten, en Consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and consumers, and the consumers, and the consumer-the meaningful growth, smaller sectors such as capital goods, cement, retail, stimula, stim.Consumer discretional takes the lead
Duggad was clear about his position on consumption: staples are out, discretionary is inside. “Our entire weight in consumption has lived in consumer discretion, so much so that we removed the only stock from consumers we kept in July. Today, if you look at our model portfolio, the consumers of consumers,” he said.

He sees a strong potential in fast trade, food delivery, jewelry, clothing, shoes and hotels. “Hotels look extremely good … In our opinion, the HotelopCycle can continue for a few years,” he added.

Sectors to watch: EMS, Car and Industrials
In addition to consumption, Duggad emphasized various overweight positions. “We are overweight on EMS companies, one of our favorite sectors … We continue to like Dixon, Amber and even Kaynes,” he said. Industrials, telecom and cars also remain in focus, with the automotive sector popping up as an important beneficiary of GST rationalization.

The GST relocation calls “probably the best and the biggest reform that a government would hope to undertake in its third term,” Duggad said that the market has responded carefully in the short term, but the structural benefits are expected to unfold over time.