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GST reforms are positioned as a major consumption stimulus, with a simplified two-tier structure (5%/18%) lowering taxes on essentials and aspirational goods, benefiting consumers by an estimated 0.6% of GDP. Key sectors gaining include durables, FMCG, apparel, autos, insurance, healthcare, and cement, with festive demand expected to amplify the impact.
Consumer-facing sectors see broad-based tailwinds, as GST rates drop across FMCG, durables, and affordable apparel/footwear. Companies like Britannia, Colgate, and Nestle stand to benefit from better affordability and trading-up trends.
The auto sector outlook improves, with GST cuts on small cars, UVs, and 2-wheelers (to 18%) boosting affordability, while regulatory support (potential RBI reduction in auto loan risk weights) adds upside. Commercial vehicle demand may recover more slowly despite lower GST.
Earnings momentum in Indian equities is strengthening, with MSCI India revenues and profits rising 9% YoY, consensus earnings growth of 13–16% for CY25–26.
The US markets continue to drive global outlook given its disproportionate 73% share of the MSCI World Index.
We continue to have a cautiously optimistic outlook on the markets, despite the sharp run-up post the Liberation Day tariff announcement in April.
Our analysis presents a balanced case, highlighting both the upside and downside drivers to the market.
Fiscal consolidation with targeted growth support: FY26 budget lowers the fiscal deficit to 4.4% of GDP, boosts capex by 10% to ₹11.2T, emphasizes six reform areas, and aims to reduce central debt to 50% of GDP by FY31. Infrastructure spending remains strong, backed by asset monetization and stable allocations to rail and road.
Urban and rural consumption uplift: Significant tax relief—including making income up to ₹1.2M tax-free—supports urban households, while rural initiatives such as higher MSPs and raising Kisan Credit Card limits strengthen farm incomes and rural demand.
Sectoral reforms and investment implications: FDI in insurance rises to 100%, enhancing competition. Overall reforms to benefit Consumer sectors, Financials, Healthcare and Real estate.
Robust revenue and expenditure trends: Government finances show rising revenues across corporate tax, income tax, and excise duties, alongside consistently high total expenditure—supporting fiscal consolidation while funding growth-oriented programs.
Artificial Intelligence (AI) enthusiasm drove US tech stocks in 2024, but investors have recently shifted from rewarding AI “buzzwords” to demanding real, measurable AI revenues.
The industry faces an enormous profitability hurdle: with a planned $1 trillion AI investment, companies would need $430B in incremental revenue to earn a 15% ROIC — an extremely high bar, nearly equal to the combined 2023 revenues of Google and Meta. This suggests AI spending may be excessive, and not all firms will benefit equally.
Clear near-term winners are hardware players, especially Nvidia with ~80% GPU market share, and potentially AMD, Dell, and other data-center and chip suppliers. Hardware is likely to outperform software over the next two years.
Mega-caps like Microsoft and Google have rallied 20–30% YTD, but their 60% jump in AI capex raises concerns that incremental returns on this investment may be lower than expected.
Zero MDR on UPI has reshaped India’s payment ecosystem, making digital payments extremely low-cost, driving UPI to dominate cashless transactions, and reducing banks’ and the government’s expenses tied to cash handling and currency printing.
Cashless adoption benefits all stakeholders: banks save on ATM and cash-related costs, the government gains from improved tax collection and lower printing costs, and payment platforms use payments as a funnel to enter higher-margin businesses like lending—while consumers and merchants pay nothing.
Financial institutions face both risks and opportunities: banks risk losing profitable credit/spend insights to UPI apps if they fail to adapt, while UPI platforms must rely on lending/financial services for profitability.
India’s digital economy continues strong momentum, with cashless share rising from ~4% to 33%, UPI holding ~60% value and ~75% volume share, debit cards declining, currency printing costs falling, and intense competition among PhonePe, Google Pay, and Paytm keeping transaction costs near zero.
Discussion on investment opportunities arising from de-globalization, self-reliance, and supply chain realignments.
Views on P/E multiple compression, US market valuations, peak dollar and peak global inflation.
Analysis of Earnings/FCF growth over the long-term as a driver for sustained stock price return.
Comment on how US slowdown augurs well for future growth in Emerging markets.
India was the world's largest economy at the dawn of AD, but its contribution diminished over the last 200 years due to colonial rule. Meanwhile America’s output increased, as the US transformed from a rural economy in the 1870s to a modern networked society in just 70 years.
Studying America’s growth matters to India – similarities between the two countries stem not just from a democratic political system, but also from the structure of the economy.
Many aspects of India’s economy today resemble that of America’s in the early and mid-20th century. Comparisons are made across household consumption, infrastructure and human capital development.
Emphasis on Indian’s strong vaccination response: By the end of 2021, 1.43 billion people had been vaccinated, with 52% of the population receiving two doses.
Detailed study of the growth drivers in place for India's sustained GDP expansion of 7% per year for the next 5 years:
Stable macroeconomic position given India’s surging exports in IT, Chemicals, Engineering and Electronic goods, while inflation and interest rates are in check.
Formalization of the economy across many sectors, driven by digitization and further regulation. Key examples include the booming payments ecosystem and healthy increase in direct tax collection.
Demographic dividend given India’s high working-age population versus other large economies.
Growing capital stock across roads and railways, optical fibres, oil & gas pipelines, power generation & transmission, water supply infrastructure and other areas as part of several Government initiatives. The decision to also go ‘carbon neutral’ by 2070 opens up several new investment opportunities.
Benefitting from recent structural reforms including GST, RERA, Bankruptcy Code, PLI Scheme and notable divestments plans. Historical reforms in the technology sector have led India to now become a powerhouse in Artificial Intelligence (AI) research.
Comment on debt-laden companies that can benefit from decade low interest rates.
Review of unwinding global economic stimulus and Indian market valuations.
Comparison of portfolio returns versus underlying growth in earnings and free cash flow.
Analysis of market timing and comparison to the play Waiting for Godot.
Comment on increased funding for India's 'new economy' businesses particularly in Fintech, SaaS and internet platforms.
Addressing ESG factors and commensurate portfolio positioning.
Re-emphasis on focused and concentrated investing in quality businesses.
Review of momentum in India's economic recovery and recent reform measures in agriculture and manufacturing (PLI scheme).
Comment on India's new age businesses and growing number of successful startups valued at more than $1 billion.
Discussion of large firm dominance and their contribution to profits over the last 20 years.
Analysis of "Justified P/E" versus "Actual P/E" for high quality companies over the last 15 years.
Review of global and Indian equity market valuations.
Review of the recent Keynesian fiscal stimulus across developed and developing markets.
Analysis of the lessons learnt by policymakers from the economic depression of 1929.
Comparison of the relative attractiveness of equities to other asset classes such as fixed income.
Analysis of the latest portfolio positioning, with comparisons to the game of Chess.
Putting Covid-19's impact into perspective.
Comment on India's increasing economic resilience and dynamism.
Further reexamination of 'high quality' and 'emerging quality' businesses and their potential returns over a five year horizon.
Comment on the role of Indian pharmaceutical companies in tackling the Covid-19 pandemic.
Analysis of opportunities in this sector, notably in areas such as complex generics and contract manufacturing.
Discussion on the magnitude and duration of Covid-19 and our relatively early detection of the problem.
Comment on the aggressive steps taken by central banks and governments globally to mitigate the impending economic slowdown.
Analysis of India’s preparedness for Covid-19 and the country’s underlying economic strengths.
Description of the characteristics of Ātman's underlying portfolio of ‘high quality’ and ‘emerging quality’ companies.
Comment on market valuations and portfolio positioning.
Discussion of the emerging threat of Covid-19.
Comment on oil prices, India’s economic strengths and potential for global supply chain realignment in a post-Covid world.
Comment on the fundamentals of Ātman's underlying investments including earnings growth and return on capital.
Review of recent macroeconomic data points from USA & China.
Comment on rising global debt and negative bond yields.
Analysis of equity valuations across Developed and Emerging markets.
Review of the latest macroeconomic data points and market valuations among large and mid-sized companies.
Comment on recent Government reform agenda - disinvestment, enhancing liquidity in the banking system, further cuts in taxation, changes in labour laws.
We study the variability in demand (Bullwhip/Forrester effect) and revenue growth from the level of the end consumer down to the supplier, presenting recent evidence from India and historical anecdotes from Developed markets.
This event provides deep insights into the near systemic failure of the US banking system. We study Bear Stearns, Lehman Brothers and Northern Rock, a UK bank.
Given the tight liquidity conditions in the Indian banking system in 2018/2019 and failure of IL&FS, one can draw interesting parallels from the American experience.
US Housing finance companies that grew their asset base too quickly without enough emphasis of securing low cost liabilities ran into trouble in the 1980s. Many companies that had poor risk management practices saw eventual bankruptcies.
The learning from this study is relevant in analysing the liquidity issues facing India’s housing sector with the near collapse of companies such as Dewan Housing Finance.
Review of the macroeconomic data points in the Indian economy.
Views on the recent corporate tax rate cuts to 25.6% from 34.9%.
Review of India's shadow banking sector and its impact on the real estate segment.
Study of the Global Financial crisis (GFC) of 2008, Savings & Loans (S&L) crisis of the 1980s and drawing relevant conclusions that help analyse the Indian financial system, given recent liquidity issues.
We refer to historical studies on US 'bull' market returns with data going back to 1926.
"Time in the market, not timing the market" is key.
Review of recent macroeconomic data points from USA, China and Emerging markets.
Review of recent macroeconomic data points in the Indian economy.
Oil prices witnessed a sharp 35% fall in the last quarter of 2018. We analyse the short-term factors behind this fall and discuss its positive implications on the Indian economy.
We analyse the historical inflation-adjusted price of oil versus other commodities such as precious metals, industrial metals and agricultural commodities.
We study the long-term outlook of the oil market including supply and demand, competition from alternative energy sources such as natural gas and renewables.
Analysis of the US economy and market, latest valuation of the S&P 500 and comment on US business cycle duration.
Update on the trade war between US and China.
Commentary on China’s economy.
Review of credit growth in the banking system.
Analysis of the new bankruptcy law and the resolution of distressed assets using the case study of Essar steel.
Analysis of whether the lack of independence adds a policy risk premium to markets by comparing the RBI’s case to historical events at other central banks such as the Federal Reserve, European Central Bank and Bank of England.
Analysis of recent moves in the Indian Rupee (INR) vs US Dollar ($).
Discussion of long-term factors determining INR vs US $ trajectory.
Comment and discussion on the US dollar’s unique role in the global economic system.
Review of financial strength of India’s Non-bank Financial Companies (NBFC) and Housing Finance Companies (HFC) in a tighter liquidity environment.
Comparison of balance sheet strength of key companies operating in this space.
Review of India’s macroeconomic strength: inflation, current account, fiscal deficit, debt position, forex reserves.
Comparison against key large emerging market nations.
Review of the Goods & Services Tax (GST) and its long-term benefits on the Indian economy.
Analysis of growth in direct tax collection.
Given the rising trade war between the US and China, it is pertinent to study the impact of a potentially slower growing China on the world.
We analyse consumption-driven economies such as India and compare it to export-driven economies of East Asia.
India has made inroads in diversifying its export base to include more complex sectors.
These productive capabilities help boost economic growth projections over the coming decade.
Review of the ‘Aadhaar’ program (world’s largest biometric database) and the digital payments ecosystem.
Analysis of how India’s digital infrastructure can boost the country’s economic growth.
Information Technology (IT) services accounts for about 17% of the global annual $3.7 trillion spend in technology.
Ongoing transition towards Digital, Mobile, Analytics and Cloud segments at the expense of traditional ERP maintenance.
Selective Indian IT companies are well positioned to increase market share through organic or inorganic routes. Use of strong net cash balance sheets to remunerate shareholders via dividends and share buybacks.
Analysis of US tax reform and interest rate cycle.
Discussion on US vs China trade-war risks and de-globalisation.
Detailed analysis of Public Sector Banks (PSU) vs Private sector banks in light of the Nirav Modi ‘scam’.
Review of the strength of India’s banking system.
Comment on the long-term investment case for this sector.
Review of the government’s areas of spending in a pre-election year.
Analysis of the government’s fiscal consolidation road map.
Analysis of India’s long-term secular growth drivers - growth in capital stock, change in labour force, progress on reforms and technological development.
Review of year of low market volatility including analysis of the US economy, recent reforms in China and comment on the elevation of Xi Jinping in recent Communist Party Congress.
Comment on the Government’s recent recapitalisation plan for Public Sector Banks (PSU).
Review of credit growth in the banking system.