Triple policy boosters set stage for a stronger market year ahead: Ajay Bagga

As market exuberance returns to Dalal Street, the focus is shifting from short-term volatility to the underlying drivers that could shape India’s economic and market trajectory in the coming year. According to market expert Ajay Bagga, a combination of fiscal and monetary support is laying the foundation for a much stronger performance compared with last year.

Speaking to ET Now, Bagga said the Indian economy is entering a phase of renewed momentum, aided by what he described as “triple boosters” unleashed by the government. “See, overall, the economy will do much better than last year. There is a pickup coming in and there are triple boosters that the government has unleashed, income tax cuts, GST cuts, and RBI rate cuts,” he said.

He added that the central bank now has greater flexibility to ease policy further, as external pressures on the currency have moderated. “We are expecting more RBI rate cuts because they have handled the rupee depreciation quite well and the pressure is off with the appreciation in the yuan. So, the competitive pressure on the rupee is off and that is creating space for the RBI to cut rates more,” Bagga noted.

While near-term banking results may remain subdued, Bagga believes the benefits of lower rates will start showing up in the coming quarters. “This quarter, the gone quarter, December, the banking results will not be that great but going ahead we are expecting those rate cuts to start boosting the economic momentum and that will help the banking and financials to perform this year,” he said.

On the broader market outlook, Bagga struck an optimistic tone, pointing to a rebound in nominal growth. “So overall, this is looking a quite robust year for the Indian markets and we are expecting nominal GDP to touch double digits again,” he said. He highlighted that the government’s budget assumptions were already aligned with this view. “The budget maths had factored in a 10% nominal GDP growth. We are nearer to 9% right now. We are expecting that next year we should touch that double digit nominal growth again, that then translates into 14-15% earnings growth for the key sectors.”

In terms of sectoral leadership, Bagga expects financials to be at the forefront of the rally. “So, we are expecting financials to lead this charge,” he said, adding that several cyclical and policy-linked sectors could also see strong traction. “Along with that, a lot of the power companies, energy companies, oil and gas should do well.”

Technology stocks, which have faced headwinds in recent quarters, may also find renewed support if global monetary conditions ease further. “It, we are expecting with the US rate cuts more space to be created for further orders, so you could see traction picking up in it as well,” Bagga said.

Finally, Bagga said infrastructure-linked sectors such as railways and defence will hinge on government spending signals, particularly in the upcoming Budget. “Railways, defence will again depend on the government infra spend. We are expecting the defence budget to go up. So, defence stocks will probably rally into the budget on that anticipation,” he said.

Overall, Bagga’s assessment suggests that while pockets of exuberance remain, the broader market optimism is increasingly being underpinned by macro improvements, policy support and a revival in earnings growth expectations.