According to Shravan Sreenivasula, Head – Investment Solutions at Avendus Wealth Management, these factors have disrupted inventory clearance and created caution across key industries such as textiles, gems & jewellery, auto ancillaries and chemicals.
While the impact is expected to be transitory, clarity on GST stabilisation and a potential trade deal with the US will be crucial in restoring momentum. Edited Excerpts –
Q) What is your take on the US Fed policy outcome and how will it impact Indian markets?
A) The US Federal Reserve cut the Fed Funds rate by 25 bps to a 4.00–4.25% range on September 17, 2025, after a nine-month pause. The move appears more like a risk-management cut than the start of an easing cycle.
Balancing its dual mandate of maximum employment and price stability, the committee leaned towards supporting employment.Recent downward revisions, over one million jobs cumulatively in the past few months, strengthened the case for such a shift.Typically, the Fed signals its policy stance through both the dot plot and its commentary. This time, however, the two diverge: The dot plot reflects a dovish outlook, while the narrative remains hawkish.As a result, global markets, including India, may face heightened volatility, with participants forced to reassess the Fed’s intentions at each policy meeting.
Q) FIIs have been net sellers for most of September. How should investors decode this? One thing which FII chase is growth which we have show but still FIIs continue to sell – is it valuation?A) FIIs have shown some respite in selling over the past few days, with inflows of over USD 500 million in the last seven trading sessions. This comes after nearly USD 7 billion of outflows in the preceding two months.
The sell-off was driven by a mix of weaker growth and elevated valuations in India, contrasted with stronger growth and more reasonable valuations globally.
As a result, MSCI India has underperformed MSCI World by 24% and MSCI Emerging Markets by 31% over the past year.
However, as corporate earnings are expected to recover in the second half, FIIs may gradually return. Importantly, steady domestic institutional flows of USD 3.5–4.0 billion per month have more than offset the impact of FII selling, providing a strong support base for the markets.Q) Do you think tariff could have an impact on India Inc. results for the September quarter?A) Corporate earnings for the September quarter may reflect some pressure, driven by two key factors.
First, the implementation of new GST rates effective September 22, 2025, led to delays in channel inventory clearance. Second, the imposition of higher US tariffs – and uncertainty around their possible extension – created caution across businesses.
While the direct impact has been more visible in sectors such as textiles, gems & jewelry, auto ancillaries and chemicals, the broader sentiment has also weighed on decision-making across other industries.
We view these headwinds as transitory. Demand is likely to normalize once the new GST regime stabilizes and clarity emerges on a trade deal with the US.
Q) Which sectors are you overweight and underweight on?
A) We maintain an overweight stance on NBFCs, insurance, consumer discretionary, metals, cement and power, supported by favorable demand drivers and sector-specific tailwinds. We maintain equal weight on banks and IT, balancing near-term uncertainties with stable medium-term fundamentals.
Conversely, we hold an underweight position in industrials, infrastructure, FMCG and pharma, where valuations appear stretched or earnings visibility remains limited.
Q) The precious metal continued its glitter as Gold hits fresh record highs. What is driving the rally and what is the outlook?A) The sharp rally in gold prices has been primarily fueled by strong central bank demand, with purchases running at an annualized pace of 1,000 metric tonnes, double the average of the past decade. Gold has now overtaken US Treasuries to become the second-largest asset in global central bank reserves.
Alongside this, themes of de-dollarization, heightened geopolitical tensions and the impact of US tariffs have further supported demand for the yellow metal. Given these persistent drivers, the buoyancy in gold prices is likely to sustain in the near to medium term.
Q) Which one would be the right bet in the portfolio in 2025 – Silver or Gold?A) We continue to favor both gold and silver, and are adding them to portfolios in equal proportion. While gold remains supported by central bank demand and macro uncertainties, silver has its own set of strong drivers.
Its high industrial usage, particularly in solar panels and electronics, combined with a supply-demand imbalance and favorable gold-to-silver price dynamics, underpins the case for allocation.
That said, silver has earned the moniker “Devil’s Metal” for its volatility and erratic price movements. Hence, a balanced allocation between gold and silver is preferred to capture upside potential while mitigating risks.Q) Where are pockets of opportunities in this market in case someone has a time horizon of say 3-5 years?A) India offers a diverse set of opportunities across asset classes. In listed equities, the trend may shift from broad-based portfolios that have dominated in recent years to more bottom-up, stock-specific strategies.
Unlisted opportunities in deals and funds also remain attractive, while hybrid instruments such as REITs and InvITs are expected to see greater allocations.
Hybrid mutual funds stand out for offering superior post-tax returns without diluting risk, and the newly introduced Specialized Investment Fund (SIF) could gain acceptance as skilled managers demonstrate their ability to generate sizeable alpha over traditional alternatives.
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