Julius Baer sees consumption revival in India taking stocks to record high

“The biggest theme going forward will be a revival in consumption in India,” Nitin Raheja, head of discretionary equities at Julius Baer India, said in an interview. One third of his portfolio is in consumption-linked themes, and he’s increasing bets on retailers focused on tier-two cities and apparel firms.

Lower- and middle-income segments will lead the pickup in India’s consumer spending, aided by slowing inflation, abundant monsoon rains and income-tax cuts, said Raheja, who oversees portfolio management services and alternative investment funds for the Zurich-based wealth manager in India.

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There was a K-shaped recovery in India after the Covid-19 pandemic, and the bottom part which suffered the most will likely now see a revival, he added.

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While elevated valuations could keep the market “range-bound” in the next few months, Raheja expects the benchmark NSE Nifty 50 Index to scale fresh highs after October, as consumer demand flows into corporate profits.

The gauge is 4.6% away from its peak set in September and the central bank’s jumbo rate cut Friday is further raising expectations of a record-breaking surge.

“Private consumption, the mainstay of aggregate demand, remains healthy, with a gradual rise in discretionary spending,” Reserve Bank of India Governor Sanjay Malhotra said Friday. “Rural demand remains steady, while urban demand is improving.”