Market Outlook – September 2025

Economy & Earnings
• Despite GST cuts and festive demand, the economy faces a white-collar employment crisis.
• Just 40 million high earners support 200+ million dependents, straining consumption.
• US tariffs (50%) continue to weigh on exports; tax cuts offset only ~50% of this damage.
• Nifty earnings, which dipped after Diwali 2023, may see a weaker Sept quarter vs June.

FIIs & Currency Risk
• FIIs remain net sellers due to:
o Weakening Rupee (at risk of breaching ₹90/$)
o Earnings downgrades
o High valuations
• A comeback looks unlikely until the Rupee stabilizes and US-India trade frictions ease.

IT Sector: Valuation Risk
• H1B visa fee hike = minor hit (~5% margins).
• Bigger risk: US hostility and geopolitical pressures → P/E de-rating.
• Fundamentals (digital, AI, automation) remain strong, but valuations are stretched.

Consumption & Rural Themes
• Govt policy stimulus added ~1.8% of GDP to consumption.
• Revival expected 2026–27, driven by:
o FMCG, Auto, BFSI (large-cap banks).
o Hidden gem: rural food & agri-processing (e.g., Dodla Dairy).

Sectors to Avoid
• Overhyped PSU capex stories: Railways, Defence, Roads.
• Fiscal space is shrinking; capex likely to plateau around ₹10T.

Advice for Retail Investors
• Shift to quality large caps: Auto, FMCG, Banks.
• Diversify globally: US, EU, Taiwan small/mid-caps → 2x India’s growth at ½ valuations.
• Add gold & silver as hedges.

Ideal Portfolio Allocation
• 1/3 India 🇮🇳
• 1/3 Global Equities
• 1/3 Precious Metals

Final Thought
Over the past 4 years, 80% of flows went into small/mid-caps — now trading at stretched multiples.

Diversification = Survival. Balanced exposure is the only path to long-term wealth creation.