Global economic slowdown could be temporary; current volatility an opportunity, says Arihant Capital Chairman

Expert view on markets: Ashok Jain, the chairman of Arihant Capital Markets, says smart investors can take advantage of the current volatility as it offers an opportunity to find good companies at reasonable valuations. In an interview with Mint, Jain shared his views on the global economic slowdown and its impact on the Indian stock market and whether the US Federal Reserve may go for an aggressive rate cut. Here are the edited excerpts of the interview:

How to navigate market volatility? When do you expect the market to stabilise?

It is important for investors to stay focused on their long-term goals, especially during volatile times.

I have always emphasised the importance of being calm and not succumbing to impulsive decisions when markets are volatile. And one must absolutely refrain from taking leverage in such markets.

For smart investors, the current volatility offers an opportunity to find good companies at reasonable valuations.

Thoroughly researching the company before investing is crucial to your investment success. Plus, if the company has strong fundamentals and good management, while the volatility may affect its stock price, you know it will weather the storm and reward investors in the long run.

As for when the market will stabilise, it's really hard to predict for anyone. However, since the India VIX seems to be cooling off, we believe the market will stabilise gradually.

How could the global economic slowdown impact the Indian stock market?

We are very positive on the Indian economy and have been bullish on India’s long term growth story.

It's well-established that India’s correlation with global GDP growth is extremely low as its growth story is driven by the country’s domestic consumption and growing middle-class wealth.

India's large and growing domestic market provides a buffer against global economic fluctuations, making the country resilient to global economic slowdown.

Indian stocks have been less volatile compared to their Asian peers in the recent correction. Additionally, the rising participation of domestic institutions will also help Indian capital markets withstand any major global impact.

Domestic investors have been pouring over ₹25,000 crore every month through systematic investment plan (SIP), even during the recent market turmoil. In the short-term, there may be bumps but I believe India’s economy will stand firm even amidst uncertainty or slowdown in the global economies.

It's also important to note that India's exposure to potential US tariffs is minimal, as exports of manufactured goods to the US constitute only about 2% of India's GDP. Consequently, the overall economic impact of such trade measures is expected to be limited.

That said, I believe this global economic slowdown seems temporary and may last for a few months. However, this will strengthen the US economy in the long term and should overrun the global markets.

Some of the deficits the US faces now should be relaxed or eased. This is an opportunity for India because its overall market debt or trade deficit with the US is relatively low.

With the risk of a recession looming, should we expect aggressive rate cuts from the US Fed? How will it impact Indian markets?

It’s too early to call this a recession, though economic slowdown risks exist. Inflation in the US has been cooling, opening the door for potential rate cuts by the Federal Reserve. 

If the Fed adopts an aggressive rate-cut stance, it could boost global liquidity and benefit emerging markets like India. 

Domestically, we've already seen two consecutive rate cuts by the RBI along with ample liquidity support, which may continue if global conditions remain supportive.

What is your outlook for the Indian economy?

The Indian economy looks robust right now. Rural consumption is strong, our bank NPAs is low, the overall corporate debt is also down, our current account deficit is also at historical lows – placing the country in a strong position fundamentally. 

Additionally, the recent decline in oil prices will also help India. We are positive on the Indian economy.

Given the recent correction in the market, it can be an opportunity for investors who missed out on higher levels to build up their portfolios. 

There is a very high probability that India will come out as a winner in this uncertain scenario of trade wars.

What domestic themes would you recommend playing?

Given India’s strong economic fundamentals and structural growth drivers, several domestic themes look promising. 

Infrastructure continues to be a key focus, backed by government spending on roads, railways, and urban development. Manufacturing, especially under the PLI scheme, offers long-term potential.

Banking and financial services remain attractive due to improving credit growth and asset quality. 

Rural and urban consumption is another theme supported by rising incomes and favourable demographics. Additionally, sectors like renewable energy and digitisation are gaining traction. 

Investors may consider these themes for long-term portfolio building aligned with India’s growth story.

At Arihant, we have created stock baskets, hand-picked after thorough research for investors to get exposure to these sectors for creating long term wealth.

Read all market-related news here

Read more stories by Nishant Kumar

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of the expert, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.