Triple policy boosters set the stage for a stronger market year ahead: Ajay Bagga

As market exuberance returns to Dalal Street, the focus shifts from short-term volatility to the underlying factors that could shape India’s economic and market trajectory in the coming year. According to market expert Ajay Bagga, a combination of fiscal and monetary support lays the foundation for a much stronger performance compared to last year.Speaking to ET Now, Bagga said the Indian economy is entering a phase of renewed momentum, helped by what he described as ‘triple boosters’ unleashed by the government. “Look, overall, the economy will do much better than last year. There is an upturn coming and there are triple boosters that the government has unleashed: income tax cuts, GST cuts and RBI rate cuts,” he said.

He added that the central bank now has more flexibility to ease policy further as external pressure on the currency has eased. “We expect more rate cuts from the RBI because they have handled the rupee devaluation quite well and the pressure is off due to the appreciation of the yuan. So the competitive pressure on the rupee is off and that creates room for the RBI to cut rates further,” Bagga said.While banking results may remain subdued in the short term, Bagga believes the benefits of lower interest rates will start to materialize in the coming quarters. “This quarter, the past quarter, December, the banking results are not going to be that great, but going forward, we expect these rate cuts to drive economic momentum and that will help the banks and financial institutions perform this year,” he said.

On the broader market outlook, Bagga struck an optimistic tone, pointing to a recovery in nominal growth. “So overall, this looks to be quite a robust year for Indian markets and we expect nominal GDP to reach double digits again,” he said. He emphasized that the government’s budget assumptions were already in line with this vision. “The budget calculations assumed nominal GDP growth of 10%. We are now closer to 9%. We expect to reach that double-digit nominal growth again next year, which will then translate into earnings growth of 14-15% for key sectors.”

In terms of sectoral leadership, Bagga expects the financial sector to lead the rally. “So we expect the financial sector to lead this trend,” he said, adding that several cyclical and policy-related sectors could also see strong traction. “In addition, many energy companies, energy companies, oil and gas should do well.”

Technology stocks, which have faced headwinds in recent quarters, may also find renewed support if global monetary conditions ease further. “We expect that with the US interest rate cuts, more room will be created for further orders, so you could also see traction increasing there,” Bagga said. On the consumption theme, he identified cars as one of the main beneficiaries. “Cars are leading the Indian consumption theme. I think this is a good way to play into the Indian consumption theme through cars,” he noted.

Finally, Bagga said infrastructure-related sectors such as railways and defense will depend on government spending signals, especially in the upcoming budget. “Railways and defense will once again be dependent on the government’s infrastructure spending. We expect the defense budget to increase. So defense stocks are likely to come into the budget in that expectation,” he said.

Overall, Bagga’s assessment suggests that while exuberance remains, broader market optimism is increasingly underpinned by macro improvements, policy support and a revival in earnings growth expectations.