ETMarkets Smart Talk | Normal monsoon to revive rural demand, boost FMCG and auto Stocks: Samir Bahl

A normal monsoon in 2025 could be the catalyst rural India needs to bounce back, setting off a chain reaction across key consumption-driven sectors.

In an exclusive interview with ETMarkets, Samir Bahl, CEO – Investment Banking at Anand Rathi Advisors, highlights how improving rainfall patterns are poised to uplift rural demand, benefitting segments such as FMCG, automobiles, and agriculture-allied industries.

He also shares his views on market trends, sector preferences, and investment strategies in a rapidly evolving macroeconomic landscape. Edited Excerpts –

Q) Thanks for taking the time out. After a stable May, the market turned volatile in June. 1H2025 has been robust with Nifty closing in the red in just 2 out of the last 5 months; however, we still underperformed EM peers in 2025. How do you see markets in the medium-to-long term?

A) The Indian market’s resilience in the first half of 2025 is commendable, especially given global headwinds. While we have underperformed some emerging market peers, this is partly due to higher valuations and cautious FII flows.

Amid the global turbulence and shifting economic sands, India’s position as an outlier of stability and growth has only become more pronounced. India’s GDP grew by 7.4% in the quarter ended March 2025, surpassing expectations and bringing the full-year growth for FY25 to a robust 6.5%.

With this momentum, India retains its position as the world’s fastest-growing major economy and remains firmly on track to become the fourth-largest economy by the end of FY26. India’s fundamentals are robust, and the outlook remains bright.

Q) What is your take on the outcome of the MPC meeting in June. What is the trajectory you foresee for rates in 2025?

A) India cranked up the liquidity this week, with the RBI pulling a surprise 50 bps repo cut and a 100 bps CRR slash. This decisive move underscores the central bank’s clear focus on supporting growth amid a benign inflation environment.

Given this backdrop, we expect the RBI to adopt a wait-and-watch approach over the next few meetings, closely tracking inflation dynamics and the pace of monetary transmission.

If macro conditions remain favorable, additional rate cuts of 25–50 bps could materialize in 2025.

Q) Which themes look attractive to you for the next 6-12 months amid trade war ears, strong dollar and possible scenario of falling interest rates?
A) RBI’s shift in liquidity stance appears aimed at curbing potential financial exuberance. Overall, these measures are likely to spur consumption and kickstart the private capex cycle.

We view this as a strong tailwind for equity markets, particularly for rate sensitive segments such as NBFCs, banks, discretionary consumption (including autos and consumer durables), real estate, and infrastructure.

Q) The IMD has predicted a normal monsoon in 2025 – do you see this supporting consumption stocks/auto stocks?
A) A normal monsoon is a strong positive for rural demand. It doesn’t just improve food output-it revives rural demand for goods, services, housing, and transportation, setting off a positive multiplier effect across the economy.

For example, agriculture-allied sectors (tractors, seeds, fertilizers), fast-moving consumer goods (FMCGs) with large rural sales, and automobiles (two-wheelers, entry-level cars) often get a boost from a good monsoon.

Q) How do you see flows – FIIs have recently turned positive on Indian markets, while DIIs have supported the rally. Do you see a reversal of flows into Indian markets?
A) FIIs have turned net buyers for the last 2 months, reflecting improving sentiment towards India amid global uncertainty. DIIs, especially mutual funds and insurance companies, continue to provide a strong domestic bid.

While short-term reversals are possible due to global risk-off events, the long-term outlook for flows remains positive, given India’s growth prospects, political stability, and improving macro fundamentals.

Q) Is there any theme or sector where one should avoid fresh investments in the current environment?
A) Caution is warranted in sectors with stretched valuations and limited earnings visibility, such as select pockets of mid and small caps, and certain segments of new-age tech businesses where profitability remains distant.

Q) Have you seen the recent trend of block deals taking place? Is that largely promoter selling? If yes, is that a worrying sign for stocks or is it business as usual?
A) The recent uptick in block deals is a mix of promoter stake sales, private equity exits, and institutional rebalancing.

While promoter selling can sometimes raise concerns, it is not always negative—often, it might be for diversification or regulatory reasons.

What matters is the quantum and context: if the selling is not due to business stress and is absorbed by long-term investors, it’s business as usual.

Q) What is your call on the small & midcap space? Are they still trading at expensive valuations, and are large caps still a better play?
A) Many small and midcap stocks have seen sharp rallies and are trading at elevated valuations relative to historical averages. While select opportunities exist, overall risk-reward appears more favorable in large caps, especially given global volatility and the potential for mean reversion.

Q) Many investors who stayed on the sidelines in the beginning of 2025 and are now experiencing FOMO as markets have seen a significant rally, but it is still down by about 5% from highs. Should they adopt staggered buying, keep cash or do a lump sum investment?
A) Time in the market is more important than timing the market. For a disciplined investor focused on long-term wealth creation, both lump sum and staggered investments can be effective strategies.

Over a sufficiently long horizon, staying invested matters more than how frequently one invests. Staggered investing, in particular, promotes discipline and enables rupee-cost averaging—helping to reduce the impact of short-term volatility and the risks associated with trying to time the market.

Q) COVID cases are rising. Can this fuel hospital stocks, or should investors keep an eye on that theme? What are your views?
A) A rise in COVID cases could lead to a short-term uptick in hospital and diagnostic stocks, as we saw in previous waves. However, with higher vaccination rates and improved preparedness, the impact may be less pronounced than before.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)