"Union Budget 2025-26 brings some good moves that could shape the equity markets"

With global companies looking for China+1 alternatives, India’s manufacturing sector appears well-positioned for long-term expansion, which could create investment opportunities across multiple industries, states Nikhil Rungta, Co-Chief Investment Officer – Equity at LIC Mutual Fund Asset Management Ltd.

The Union Budget for FY 2025-26 has introduced several reforms to accelerate growth and invigorate private sector investments. Which specific measures do you believe will have the most significant impact on the equity markets?
The Union Budget for FY 2025-26 brings some good moves that could shape the equity markets. The higher income tax exemption means more money in people’s hands, which should boost spending. This is good news for FMCG and the auto sector. MSMEs get better support, helping them scale up and contribute more to the economy. Infrastructure spending continues, which may be positive for the construction and industrial sectors in the long term. Plus, the new agricultural scheme aims to strengthen rural demand, which could benefit agri-businesses.

Overall, these steps can create a strong foundation for economic growth and private investments.

How do you assess the potential impact of RBI monetary policy change on inflation and the broader economy?
With the RBI’s monetary policy announcement today, markets are keenly watching for any shifts in stance. If the RBI maintains the status quo, it signals confidence in inflation control while sustaining growth momentum. A rate cut, though, would boost liquidity, supporting borrowing and investment-led sectors. On the other hand, a hawkish tone to curb inflation could tighten financial conditions, impacting demand.

The decision will be crucial in setting market sentiment and influencing equities, bond yields, and business outlook for the coming months.

With the government's continued focus on the 'Make in India' initiative, how do you foresee the manufacturing sector evolving, and which sub-sectors might benefit the most?
The ‘Make in India’ push continues to drive growth in domestic manufacturing, with key incentives like PLI schemes and infrastructure development. As localisation efforts strengthen supply chains, sectors like electronics, auto components, and defence manufacturing may gain the most. Renewable energy equipment and chemicals may also benefit India as it reduces import dependence. With global companies looking for China+1 alternatives, India’s manufacturing sector appears well-positioned for long-term expansion, which could create investment opportunities across multiple industries.

Recent projections suggest India's GDP growth for FY 2024-25 is expected to be between 6.5 per cent and 7 per cent. What factors do you think will drive this growth, and where do you see potential challenges?
India’s GDP growth of 6.5-7 per cent for FY 2024-25 will be driven by strong domestic consumption, government-led infrastructure spending, and robust manufacturing under ‘Make in India.’ Services, particularly IT and financials, will continue to be key contributors. However, challenges like global economic slowdown, geopolitical uncertainties, and inflationary pressures could pose risks. A stable policy environment, resilient private investments, and rural demand recovery may be crucial in sustaining this growth momentum.

Given the current economic indicators and policy environment, which sectors do you believe present the most attractive investment opportunities in the near to medium term?
With the recent budget’s focus on consumption, sectors tied to domestic demand may be attractive. Consumer goods, autos, and retail may benefit from increased disposable incomes and tax relief measures. Financials, especially banks and NBFCs, are likely to gain from rising credit demand. Infrastructure and construction may remain strong plays due to continued government spending.

Additionally, manufacturing, particularly in electronics and auto components, may see tailwinds from the ‘Make in India’ push. Overall, sectors linked to consumption and capital expenditure appear well-positioned for growth.

In light of recent market volatility, how do multi-asset funds serve as a tool for diversification, and what advantages do they offer to investors seeking stability?
Multi-asset allocation funds can be a way to handle market volatility because they spread investments across equities, debt, and gold, balancing risk and returns. When equities are shaky, debt will seek to reduce portfolio volatility, and gold may act as a hedge during uncertain times.

The flexibility to adjust allocations based on market conditions may help investors stay protected while still capturing growth. For those looking for a smoother ride in unpredictable markets, multi-asset allocation funds may offer a smart way to stay invested.

What differentiates your Multi-Asset Allocation Fund from similar offerings in the market, and how does it align with the investment objectives of conservative versus aggressive investors?
Our LIC MF Multi-Asset Allocation Fund (An Open ended Scheme investing in Equity, Debt and Gold) stands out with its dynamic allocation strategy, ensuring an optimal mix of equities, debt, gold ETFs, and /or silver ETFs based on market conditions. Unlike rigid allocation funds, we may actively adjust exposures to maximise returns while managing risk.

For conservative investors, the fund seeks to reduce portfolio volatility through debt and gold exposure, reducing downside risk. For aggressive investors, the equity component may provide growth potential, with tactical shifts enhancing opportunities. This flexibility makes it a well-balanced solution for investors across risk profiles, ensuring long-term wealth creation with reduced volatility.

Lastly, what advice would you like to share with novice investors who want to enter the mutual fund bandwagon? 
For new investors, the best advice is to start early, stay consistent, and think long-term. Mutual funds are a great way to build wealth, but patience is key. Begin with SIPs to take advantage of compounding and smooth out market ups and downs. Pick funds that match your goals and risk appetite. Don’t get caught up in short-term market noise; staying invested through cycles is what really pays off. And if you’re unsure, talk to a financial advisor. Investing isn’t about quick gains—it’s a journey, and the sooner you start, the better!

Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.