Summary:
Global growth is uneven — the US shows resilience but mounting fiscal stress, China faces banking and real-estate headwinds, and Europe struggles with political instability. India remains a relative outperformer with 7.8–8% GDP growth, strong fiscal discipline, and policy-led consumption support, though near-term pressure from tariffs, FII outflows, and stretched mid/small-cap valuations persists. Kotak AMC maintains a neutral stance on equities, positive on debt and gold, and prefers large-cap quality exposure within equities
Global
- China: Banking stress and property NPAs rising; exports slow amid tariff wars and rerouted trade scrutiny.
- US: Fiscal deficit high; debt near $38 T; dollar down 12% YTD — risk of capital flight; equity gains narrow to a few mega-caps.
- Europe: Political turmoil and yield spikes; corporates borrowing below sovereign rates.
- Regional divergence: Korea +55% YTD on reforms; Europe rebounds from low base — global policy mix still fragmented.
Domestic Economy
- GDP 7.8–8% (Q1 FY26) — India to contribute ~19% of global growth (PPP) through 2030.
- Fiscal & GST: Nominal GDP +10%; GST +9.8%; sovereign upgrade after 18 years as yield spread vs US narrows to 2.4%.
- Stimulus: ₹8–9 L crore (~2.2% of GDP) via tax cuts, pay commission, repo reduction; boosts FY27 growth.
- Trade: INR −10–12% vs major FX aids exports; FDI flat.
- Tariffs: 25% US duties on select Indian goods; “Swadeshi spending” push to offset
Markets & Valuations
- Performance: India −8% YTD vs MSCI EM +16%.
- Profitability: Profit-to-GDP 5.4%; MCap/GDP 125% (vs 87% avg).
- Valuations:
– Large Caps 20–21× (fair) – Mid Caps 26× (premium) – Small Caps 25× (stretched) - Earnings: FY26 EPS cut to ₹1,100–1,125; FY27 ₹1,200–1,225.
- Flows: FIIs at decadal low; DIIs offset via SIPs & IPOs; supply ₹50–70 B ahead.
- View: Neutral; overweight large caps, underweight small caps.
Investment Outlook and Fund Strategy
- Equity: Range-bound; expect 11–12% CAGR over 3–5 yrs.
– Business Cycle Fund: Overweight industrials, financials, consumption.
– Pioneer Fund: Blend of global innovation + Indian growth themes.
– Thematic: Prefer Banking & Consumption indices; silver buy on dip (~$40). - Debt: Positive — falling yields, RBI inflation 2.6%; favor Income Plus Arbitrage FoF for tax efficiency.
- Hybrid: Balanced Advantage / Equity Savings for tax-efficient cash flows.
- Commodities: Gold supported by central-bank buying; silver by EV & solar demand; use Kotak Gold-Silver Passive FoF for dynamic exposure.
Key Takeaway
• Global macro fragile — US debt, China slowdown, tariffs cloud sentiment.
• India’s reforms, upgrade, and consumption stimulus support resilience.
• Short-term headwinds from tariffs, FII outflows, and rich mid/small-cap valuations.
• FY27 earnings recovery on track via domestic demand and export rotation.
• Maintain balanced allocation — OW large caps, neutral mid, UW small; positive on debt and gold.
