As India heads into the festive season, all eyes are on how markets will respond to recent GST rate cuts and evolving demand trends. In an exclusive conversation with Business Today, Utsav Verma, Head of Research, Institutional Equities at Choice Broking Equities, shared his perspective on the near-term outlook for equities, the impact of GST 2.0 on consumption, and the prospects for sector-specific momentum.
He also weighs in on IPO activity amid global volatility, FII outflows, and the resilience of broader markets. From festive demand drivers to investment ideas and the outlook on gold, Verma outlines where opportunities and risks lie ahead. Read the edited excerpts:
BT: How do you see markets shaping up ahead of this festive season in the wake of GST rate cuts? Do you see that there is still momentum left in the stocks?
Verma: Yes, we expect stock and sector specific momentum to continue. Demand uptick from the GST rate rationalization (to be implemented from Sep 22) is built in our forecasts. GST 2.0 has simplified the structure and most goods will now fall in only 2 brackets 5% and 18%. Life Insurance, Medical Insurance, Healthcare Devices have been exempt from all applicable GST, while these sectors remain price insensitive in our opinion. The bigger boost in demand will be seen across sub four-meter passenger vehicles, consumer durables, and commercial vehicles for which rates have been reduced from 28% to 18%. Solar cells will also be cheaper in the new regime, enabling faster adoption of Solar Cells across homes and farms alike.
The second half of the calendar year is marked with festivities and increased consumer spending across the country. The GST rate cuts are likely to buoy purchases on the back of lower pricing as most manufacturers have announced that they will pass on the benefit to the consumers. For the H1FY26, demand has remained sluggish due to various factors; there is an expectation that the rate cuts and the festive season will bring cheer to this landscape. However, the market has already baked in these expectations, with NIFTY Auto index moving up by 6% whereas BSE FMCG has remained flat despite tepid consumption. There may be momentum left in these consumption stocks but stocks will now track leading indicators such as monthly auto Sales considering that the stocks in related sectors have already seen run-up. In case the demand environment does not improve in H2FY26, markets could see some pain. We therefore, remain cautiously optimistic, on the broader markets and sector and stock specific momentum to persist.
BT. Indian benchmark indices have remained flat in the last one year. Do you think the phase of correction and consolidation is over and one should deploy cash in the large-cap space?
Verma: Yes, it is correct that benchmarks have remained flat over the last one year. Revenue Growth remains muted across sectors with outliers overstating aggregate Net Income. Outliers like Bharti Airtel, Energy Sector have skewed the results, while sectors like Technology, Consumer Discretionary have continued to struggle with tepid earnings growth.
In March 2025, we had recommended that investors should play the panic and build long term long positions. Since then, Nifty 50 has returned 12% while Nifty Midcap 150 and Nifty Small Cap 250 have returned 19%each. We turned ‘cautiously optimistic’ on the markets in our June 20 edition with any clearing up of negative news screens to take markets higher. Selective churning into stronger sectors, right stock selection and higher cash positions was recommended. We maintain our view that the market remains resilient and triggers are shaping up well for markets to GO UP; albeit with selective cash deployment in our select sectors across market caps.
BT: India has been witnessing a strong IPO activity, resilient despite global volatility. What are they key reasons behind it? Also do you think some fatigue building up after mega offerings like Tata Capital, NSE, Jio Platforms or the IPO market will continue to outshine?
Verma: Although global volatility has weighed on IPO activity, its impact has been short-lived. In FY25, the primary market hosted 80 mainboard issues, raising INR 1.63 Tn. In the unlisted markets prices NSE, Tata Capital etc. have softened by 15-20%. Hence, for issuers, sensible pricing and leaving adequate returns on the table remain critical to sustaining investor interest.Both domestic and foreign investors continue to seek companies with innovative business models, sustainable profitability, and strong competitive moats. While larger issues may not attract the same oversubscription as smaller offerings, strong fundamentals and stable cash flows will ensure healthy demand. We believe India’s IPO momentum will persist in the foreseeable future, supported by robust participation from both domestic and foreign investors.
BT. FIIs have remained net sellers for a long-time. What factors are leading to FII’s consistent exit and what trigger can bring their buying back at Dalal Street?
Verma: For YTD FY26 FIIs have sold about Rs 1.2 trillion worth of stocks, although they remain active participants in primary issuances. Their cautious stance reflects concerns over muted growth weighed against elevated valuations. Broad-based indices are trading at stretched levels, with the Nifty50 currently at 22x TTM PE versus a peak of 24.8x over the last two years. Nonetheless, India is poised to remain among the fastest-growing large economies in the coming years. A revival in demand, combined with higher credit offtake, could serve as catalysts for renewed foreign investor inflows.
BT: Do you think broader markets still have value despite muted corporate earnings? What stocks and sectors do you think may surprise in Q2 results? What are your top picks from broader markets?
Verma: We expect markets to continue offering selective opportunities across sectors, with stock- and sector-specific rallies likely to persist. Our outlook remains constructive on areas with strong structural and cyclical tailwinds, including Consumer Discretionary (Autos, Alcoholic Beverages), select IT names, Healthcare & Pharmaceuticals, and Defence. These sectors stand to benefit from festive demand, government incentives, higher public expenditure, and supportive industry dynamics. Within the broader markets, our key high conviction investment ideas include Radico Khaitan, Lumax Auto Technologies, Mahindra & Mahindra, Granules, Senores, BEL, BDL, Zensarand Nuvoco.
BT: Gold and silver has shown a solid outperformance over equities. Do you think investors have missed the rally or there is still some steam left? How should an investor approach the precious metal rally now?
Verma: Global markets remain challenged by heightened uncertainty, rising geopolitical tensions, and a shift toward protectionism and resource hoarding by major economies. Central banks have stepped up gold purchases, averaging over 1,000 tonnes annually in the past 2 to 3 years. In FY25, the RBI added 57.5 tonnes, the most in five years. While China’s central bank now holds 2,200 tonnes and the US Federal Reserve 8,100 tonnes of gold. These moves have driven a sharp increase in gold and silver prices. Looking ahead, a potential US Federal Reserve rate cut could weaken the dollar and lift prices across hard commodities. The RBI’s early redemption of sovereign gold bonds further underscores our expectations of a continued upside in gold.