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In this edition of ETMarkets Smart Talk, Ajay Garg, Director and CEO of SMC Global Securities, attributes this surge to rising financial literacy, increased participation from Gen Z investors, and a shift away from traditional investment options like fixed deposits.
He also highlights how factors such as tax relief, improved disposable income, and easier digital access are reinforcing the trend of disciplined, long-term investing across India’s smaller cities. Edited Excerpts –
Q) Thanks for taking the time out. Markets are struggling in the first month of 2H2025. What is limiting the upside?
A) In July, the market has been struggling a bit due to the ongoing tariff jitters, FII cautious stance, the Jane Street fiasco, and global macro headwinds like geopolitical tensions. However, Nifty holding firm around the 25,000 mark signals underlying resilience.
There is optimism around a potential reduction in U.S. tariffs on Indian goods, possibly below 20%, which could enhance India’s export competitiveness and support forex inflows.
Also, the active participation from domestic institutional investors and retail investors, along with a vibrant IPO market, reflected strong confidence in India’s growth trajectory over the long term.
Q) The June quarter season has just begun – how do you see India Inc. faring in this quarter? Which sectors should investors watch out for?A) India Inc. is expected to report modest earnings growth in the June quarter, supported by steady domestic consumption and easing input costs.Operating margins may see improvement as inflationary pressures soften and liquidity conditions improve, although the broader benefits may materialize more clearly in the second half of FY26.Key sectors to watch include oil marketing companies, which could benefit from stronger refining and marketing margins.
Capital goods sectors can also lead the rally in the June quarter earnings, led by the growing order book in the power and infrastructure segments.
The cement sector can witness good growth, led by higher cement prices and better sales volume growth. Higher footfalls and bed additions can boost healthcare sector earnings.
Therefore, June quarter results can offer early insights into a potential turnaround in corporate performance.Q) Everyone says it is a stock pickers market now and the day of making easy money is over. What are your views?A) The market has always rewarded disciplined stock pickers who focus on strong fundamentals and technicals. While the opportunity to make quick gains exists, it requires well-timed entry and exit decisions that are free from emotional bias.
In the current environment of volatility and geopolitical uncertainties, a well-diversified portfolio across equities, bonds, and gold is essential.
A well-diversified portfolio, combined with disciplined stock picking, continued SIP investing, and limited exposure to speculative trades, is the most resilient approach in today’s market.
Q) SIP crossed Rs 27000 cr for the first time in June. What is boosting the momentum?A) SIP crossing the ₹27,000 crores mark for the first time in June is a clear sign that investors are moving towards a disciplined approach amidst rising volatility.
This has highlighted the benefits of rupee cost averaging, helping investors navigate fluctuating markets by spreading investments over time.
Additionally, India’s robust economic performance amidst geopolitical uncertainty may seem to strengthen the trust of investors in regular investing.
The tax reliefs announced in the Union Budget and repo rate cut have increased the disposable income, which has led to higher investment.
The ease of investing, growing financial literacy in tier-2 and tier-3 cities, and Gen Z moving away from classic investment options such as FDs are also the key factors behind the surge in SIP investment.Q) FIIs are still not back in India completely – is it valuations or earnings which are proving to be headwinds?A) FIIs not completely returning to the Indian market is a combination of multiple factors, such as stretched asset valuations, muted corporate earnings in the last few quarters, and evolving global trade policies.
Once corporate earnings show clear and sustained growth that justifies current valuations, FIIs are likely to return to Indian markets with greater confidence. Despite this, India’s growth story remains intact.
As the world’s fastest-growing major economy, its resilience amid global uncertainty continues to reinforce its long-term investment appeal.
Q) Which sectors are likely to drive momentum in the 2H2025?A) Sectors that are likely to drive momentum in the second half of 2025 are healthcare, manufacturing, capital goods, and financials. The growing focus towards healthtech, R&D spends, and higher capex by hospital chains can drive the success of this sector moving ahead.
In the manufacturing sector, support policies for MSMEs, export-oriented growth, Industry 4.0, and a focus on self-dependency will also nurture the growth of this sector.
Government infrastructure spending would drive the order book of the capital goods sector. Recent rate cut and reduction in CRR to boost borrowings by both corporates and retail.
The retail inflation easing to a six-year low of 2.1% in June is a positive signal. Along with this, the steps to boost disposable income, higher rural demand due to a favorable monsoon, and the upcoming festive season could also benefit the FMCG and automobile sectors.
Additionally, the inflation drop can also pave the way for the RBI to consider another rate cut in the August meeting, thereby benefiting the banks and financial sectors with a healthy loan book and better liquidity.
Q) Any sector(s) which you think is overheated?A) The defence sector is the most talked-about being overheated or trading at high valuations. This year’s rally is influenced by the geopolitical war situations in India and at the global level.
However, these rising valuations could also be justified by its better earnings prospects with a growing order book and India’s steps to create self-sufficiency. The “Make in India” has reaped the benefits with the massive expansion in defence production in the country and exports hitting an all-time high of over ₹23,622 crores in FY25.
The indigenization efforts, record-level contracts, and dedicated Defence Industrial Corridors are also clear signs of a booming defence sector.
So, this overheating zone can be attributed to the overall growing potential of the defence sector and not just the war fancy rally.Q) Despite recent regulatory steps, retail investors still account for 91% of the losses in the derivatives segment. What more can SEBI do to protect them?A) It is surprising that 91% of the retail investors are still making losses in the EDS (Equity Derivatives Segment) in FY25.
Starting November 2024, SEBI has implemented phased measures to strengthen the derivatives market, such as only one weekly index options per exchange, higher contract sizes, upfront collection of premium from options buyers, etc.
Though the losses have widened, the SEBI study has also revealed that the individual traders are taking a cautious stance. The average daily trade value in the EDS segment by individual traders has dropped by 11% YoY in December 2024 – May 2025.
The Jane Street saga has also been the biggest eye-opener for the regulator to oversee proprietary trading firms’ activity in the F&O space.
Moving ahead, the full impact of the SEBI’s steps to manage risk, combined with the prudent checks on intraday activities in the F&O market, can surely create a more beneficial and speculative-free environment for retail traders.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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