Investors are cautious and still assessing the evolving situation tariff-related uncertainties prevail. Foreign portfolio investors continue to sell in emerging markets. This is evident from the underperformance of our market as well as other emerging markets in recent months, compared to the US and other global equities. On the positive side, consistent inflows in equity mutual funds through SIP routes have helped the markets sustain the pressure of FPI selling, says Mangesh Kulkarni, who heads Portfolio Management Services at Almondz Financial Services, in an interview: Excerpts.
Q: What do you think of the impact of high US tariffs on Indian products on the equity market sentiment? Do you think it will seriously impact the equity price for a long time?
ANS: There will be some direct impact of high US tariffs on Indian products, but it will be modest, as the Indian exports to the US account for only two per cent of GDP. Despite these tariffs coming into effect from the end of August, both sides are still open to negotiations. India has made it clear that, despite some red lines, the negotiations are still on. Definitely till the clear picture emerges and the corporate entities decide to ride over these tariffs, the Indian economy will have some impact.
There are expectations of a rollback of high tariffs post-negotiations. Rough estimates done by various economists indicate an impact of around 20-50 bps on India’s GDP in FY26. Sectors like textile, gems and jewellery, marine products, etc, will have some impacts for some time. However, I am sure that the long-term prospects of the Indian economy remain very strong. The global rating agencies like S&P and IndiaRA confirm this fact.
Overall, the impact on equity markets will be limited as the Indian growth story is primarily driven by domestic developments and policy decisions. We have observed that stocks in the domestic consumption sector support the markets, and this trend is expected to persist with plans for the government to announce restructured GST rates and another round of economic stimulus, alongside a continued focus on government capital expenditure on infrastructure.
Q: The government is planning to reduce the Goods and Services Tax (GST) on several items by reorganising the tax slabs. How do you foresee the market behaviour after implementing the decision?
ANS: We all know the government has decided to reduce the GST rates on almost every item other than sin and low-volume luxury products. The effect of GST reduction on equity markets will be minimal, as India’s growth is primarily influenced by other domestic factors and policy choices. We have observed that stocks in the domestic consumption sector support the markets, and this trend is expected to persist with plans for the government to announce restructured GST rates and another round of economic stimulus, alongside a continued focus on government capital expenditure on infrastructure.
Q: How do you foresee the market behaviour after implementing the decision?
ANS: Proposed GST reforms should support consumption and offset growth risks associated with the economy. This move is a potential catalyst for consumption growth and private capital expenditure after years of sluggishness. Rationalisation of rates is positive for various industries like food processing, automobile, cement, consumer durables, FMCG, etc.
There may be a temporary dent in government fiscal calculations and growth, but in the long run, this will provide a much-needed consumption boost, thereby promoting production growth in the forthcoming festive seasons.
Q: Which are the segments you see growth potential in, where equities are still reasonably valued and with a space for a higher earnings ratio? Do you advise investors to keep watch on any particular segment? If so, which are those segments, and how long should they keep watch on them?
ANS: I see good returns from sectors like consumer durables, hospitality, healthcare (hospitals), cement, travel and tourism (aviation), telecom, capital markets and NBFC, focusing on housing, gold and consumer financing.
With exports and business with a global focus facing some near-term challenges, domestic consumption and related sectors are well poised to sustain these uncertain times. The recent rationalisation of income tax in the budget, proposed GST reforms, and a potential economic package for industries facing tariff challenges will continue to support sectors reliant on domestic sales.
Q: With retail inflation continuing to decline, do you think it’s time for another round of rate cuts, which would make debt cheaper? Will it trigger a bull market?
ANS: Though inflation is trending down and the RBI is frontloading its rate-cut cycle, we see a brief pause in the interest rate cut cycle. The full impact of the rate cut cycle hasn’t yet been reflected in the economy. The Governor would wait for clues to ascertain the likely impact on growth from tariff wars and proposed GST rationalisation. We expect the status quo on the rates front at least till December 2025.
Q: What are the possibilities you see for a bull trigger in the prevailing political and economic environment?
ANS: Investors are cautious and still assessing the evolving situation due to tariff-related uncertainties. Foreign portfolio investors (FPIs) continue to sell in emerging markets. This is evident from the underperformance of our market as well as other emerging markets, compared to the US and other global equities. On the positive side, consistent inflows in equity mutual funds through SIP routes have helped the markets sustain foreign selling. However, I see markets remaining range-bound in the near term. Uptick in consumption due to GST rationalisation, revival in private capex, and the next set of economic reforms may lead to recovery of GDP in the second half of FY27. Instead of waiting for the overall bull trigger, our advice to investors is to be selective and hold on to quality companies. Investors must do their own research and apply their common sense before deciding on stocks.
Q: Going by the listing pattern in July 2025, a larger number of companies are listing on SME platforms. Do you think it is an indication of what is inevitably going to happen?
ANS: According to SEBI data, 241 companies were listed on the SME platform in FY25, mobilising over ₹9,800 crore. A significant number of companies listed on SME platforms indicates the formalisation of the unorganised MSME sector. However, investors must exercise caution while investing in these companies. Looking at recent incidents of investors burning their hands in SME investing, SEBI has tightened its regulatory framework. The regulator is focused on enhancing transparency, reducing the speculative participation of retail investors, and tightening the entire SME IPO process. The regulator is creating a far more sustainable, transparent, and investor-friendly SME market. Such guidelines will minimise fraud in IPOs, restrain a speculative retail trade and list only fundamentally sound companies.
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About Mangesh Kulkarni
Mangesh Kulkarni, from Almondz Financial Services, has more than 35 years of experience in equity research and portfolio management. He is recognised for his deep market insights and analytical expertise. Over the course, he has held senior roles in institutional equity research, where he specialised in banking, non-banking financial companies (NBFCs), power and mid-cap sectors. Since joining Almondz Group in 2007, he has been instrumental in shaping the firm’s research division, eventually leading the Institutional Equity Research team. He now heads Portfolio Management Services at Almondz Financial Services, where he leverages his vast experience to craft tailored investment strategies for a diverse clientele. He also holds advanced certifications in finance and capital markets and is certified by NISM as a Portfolio Manager and Research Analyst, underscoring his commitment to professional excellence.
