Q. India\u2019s GDP came in at 8.2%, yet markets barely reacted. What explains this muted response?<\/p>\n
Abhishek Banerjee: To understand the market\u2019s response, we need to look at expectations. The RBI\u2019s Survey of Professional Forecasters, which includes banks like Citi, JPMorgan, and Indian brokerages, projected Q2 GDP between 6.4% and 8.4%. The actual number, 8.2%, was near the upper end of this range.![\"ET](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2025\/09\/118783427.cms.png\")
Live EventsHowever, high-frequency data like GST collections, vehicle sales (SIAM), and trade numbers had already indicated strong momentum. Much of this optimism was already priced in.
Markets opened mildly positive but then slipped, partly because Asian markets, especially Japan, were down around 2%. Indian markets outperforming on a relative basis is still a positive.<\/p>\n
I personally expected a stronger reaction, even a move to all-time highs. But global cues, concerns around the upcoming MPC meeting, trade deal uncertainty, and geopolitical issues kept markets cautious.<\/p>\n
US-India Trade Deal<\/a>, Venezuela & Inflation<\/p>\n Q. There\u2019s limited progress on the US-India trade deal and tensions are rising around Venezuela, a key oil exporter. How do these factors impact inflation and the MPC rate cut expectations? Government support schemes exist, but much of India\u2019s export ecosystem (e.g., textiles) is unorganised, making the impact on listed companies harder to measure.<\/p>\n China exports $180 billion of garments to the US; Indian exporters have better design capabilities and brand positioning, but they still feel the headwinds from trade uncertainty.<\/p>\n On Venezuela: it\u2019s a major oil supplier and generally avoids geopolitical disputes. But rising tensions around maritime access and US pressure could sharply impact crude prices. With crude near $60, any escalation could push inflation up quickly.<\/p>\n Despite this, India\u2019s inflation is currently well below the RBI\u2019s 4% target. That gives RBI room to cut. I expect a rate cut this MPC, possibly 50 bps, not just 25 bps. No cut would surprise the market \u2014 and likely hurt smaller caps.<\/p>\n Should Indian Investors Look at Global Equities?<\/p>\n Q. Foreign equities are back in focus. Is this a good time for Indian investors to look at US or global markets? But taxation is a major hurdle.<\/p>\n Indian investors investing directly in US equities face tax on peak portfolio value at the maximum marginal rate.US investors accessing Indian markets via mutual funds or AIFs face PFIC rules, taxation on notional gains.So the opportunity exists, but tax structures make direct participation inefficient. For most investors, accessing foreign equities via Indian mutual funds or structured vehicles may be more practical.Asian Markets Outperforming IndiaQ. Korean, Chinese, and Japanese markets have outperformed India this year. Could we see mean reversion if FPI\/FPI inflows return? But with the rupee at all-time lows, India becomes attractive again. If FPIs buy at 90 and markets gain 10%, the currency appreciation from 90 \u2192 84 boosts returns further. That\u2019s called currency return<\/a>.<\/p>\n Global allocation cycles begin around Jan\u2013Feb, so inflows could start late December or early next year. When they return, they usually come in large waves, which can strongly support Indian markets.<\/p>\n Public Confusion Around a Weak RupeeQ. There\u2019s negativity around the rupee hitting record lows. For those who don\u2019t follow currency dynamics, how should they interpret this?
Abhishek: Two key bills, the India Pesticides<\/a> Act (public) and the India Seeds Act (in progress), could influence agricultural negotiations tied to the trade deal. The deal itself is clearly delayed.<\/p>\n
Abhishek: The US market still offers themes that India doesn\u2019t. Valuations are stretched but not in bubble territory, and tech capex remains strong.<\/p>\n
Abhishek: Yes, FPI and FDI flows are typically mean reverting. India has seen outflows recently, partly due to tighter compliance norms and beneficial owner transparency.<\/p>\n
Abhishek: The term \u201cweakening rupee\u201d sounds negative, but economically, a weaker currency benefits exporting nations.<\/p>\n