Axis MF’s Devalkar Sees Fed Policy Opening Floodgates for Indian Markets

Mumbai, September 18, 2025: Hinting at the upcoming policy decision of the US Federal Reserve, Shreyash Devalkar, Head of Equity at Axis Mutual Fund, noted that there could be serious repercussions on the Indian equity market. With the US market anticipating a 25 basis point rate cut could mean excess pressure on the dollar. This, in turn, could have a ripple effect and encourage the attraction of emerging markets, including India.

Market Drivers in Focus

In order to sustain the momentum of the Indian market, Devalkar emphasised the need to gain clarity on tariffs, currency stability, rising domestic consumption, and an earnings recovery.

Drawing a comparison of the performances of different sectors, he applauded the auto index, which has already rebounded to its 2024 peak, recording gains of nearly 30% since April this year. Similar progress has also been attained by the consumer durable stocks. With the onset of the festive season demand, a subsequent market performance will help in projecting whether the upward rally continues through the rest of the year.

Consumer Discretionary vs Staples

As for the sectoral domain, his preference went to consumer discretionary segments over staples, mainly because of low penetration levels in products such as air-conditioners. Additionally, there is also the growing trend of premiumisation in passenger vehicles. He explained that while staples are more dependent on innovation and advertising to drive growth, discretionary products benefit more from rising incomes, tax relief, and easier credit. Pointing towards the recent tax reforms and GST cuts, along with a good monsoon, he predicts both segments to do well, though discretionary is likely to see stronger demand cycles.

Consolidation and Outlook

Indian equities, he observed, are currently in a consolidation phase due to high valuations, persistent foreign outflows, and weaker-than-expected earnings. Over the past three years, large-caps have delivered 14% CAGR returns, while mid- and small-caps returned around 22%. Devalkar believes a time correction is underway to align valuations closer to nominal GDP growth.

Trade and Banking Sectors

On global trade, he said negotiations with the US on tariff issues remain uncertain, but India’s strategy of diversifying partnerships through FTAs with the UK, EFTA, and other regions reflects a pragmatic approach. In the banking sector, muted credit demand and caution over unsecured retail lending have weighed on performance.

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