The slowdown has been visible for months across indicators like auto sales, fast-moving consumer goods (FMCG) demand, tax collections, and electricity consumption. However, the focus now shifts to how the Reserve Bank of India (RBI) and the government will respond to these challenges.
He expects the RBI to hold off on a rate cut until early next year, while taking interim steps like adjusting the Cash Reserve Ratio (CRR) or conducting Open Market Operations (OMO) purchases.
On the government’s side, he highlighted the need for a stronger capex push to provide immediate support to the economy. “We’ve already lost two months of the December quarter,,” he explained.
India’s GDP growth for the July-September quarter stood at 5.4%, the slowest in seven quarters, and significantly below market expectations.
Sanger cautioned that while these measures might help, the market is unlikely to see a sharp recovery in the near term. “If the fiscal third quarter is as disappointing as the September quarter, there’s no rush to buy aggressively,” he said.
He also pointed out the risk of domestic investors starting to react to economic fundamentals, which could put additional pressure on the markets.
Despite the challenges, Sanger sees opportunities in selective and patient investments, especially if the current slowdown represents the trough of a mid-cycle phase.
There will also be benefits from measures like import tariffs and short-term fiscal adjustments but there is a need for coordinated action by policymakers.
Global uncertainties, including unpredictable US policies, add another layer of caution. While India is less exposed to global trade risks, Sanger said the country must remain vigilant about external factors
Also Read: Q2 GDP growth shocker may trigger action from RBI; raise questions over India’s potential growth
Also Read: HSBC economist predicts next RBI interest rate cut in February
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