$1 Trillion GDP Boost in Sight: Abhishek Banerjee on promising sectors, gold and market sentiment

Time of India

a day ago

As global macroeconomic cues continue to shape market sentiment, ET Markets' Neha Vashishth Mahajan sat down with Abhishek Banerjee, CEO & Founder of LotusDew Wealth, to decode key global trends like interest rates, inflation, China's disinflation, and Donald Trump's tariff bombshell. Banerjee also shared his outlook on Indian equity markets, sectoral opportunities, and why microcaps remain a compelling space despite volatility.
EXCERPTS
Q. Interest rates are coming down globally. What impact do you see on Indian stocks, and how do global developments factor in?
Abhishek Banerjee:
Interest rates reflect both economic activity and global trade dynamics. Right now, trade is facing uncertainty due to tariffs and supply chain disruptions. Companies are unsure whether to delay procurement or over-order in anticipation of rising costs. This creates volatility, slowing trade, reducing the velocity of money, and putting mixed pressures on inflation.
Some firms are pre-ordering large shipments, such as Apple, to hedge against future tariffs. But overall, we're seeing a slowdown in global demand and production. This gives central banks more room to cut interest rates.
Today, most central banks are turning dovish, inclined to cut rates rather than raise them. The European Central Bank announced a cut, RBI too cut the repo rates.
For equities, lower interest rates are positive. They reduce the discount rate used in stock valuations, which boosts prices, especially for high P/E, growth-oriented stocks. India, being a growth market, is likely to benefit more from this trend. Smaller and high-growth companies could outperform in a falling interest rate environment.
Q. Gold prices have surged recently. Traditionally, gold rises when equities fall—but lately, both have been moving up together. Why is this happening, and what's your outlook?
Abhishek Banerjee:
Earlier, gold and equities were uncorrelated. Now, they're moving in tandem largely because central banks are buying gold as a reserve instead of US dollars. That's putting upward pressure on bullion.
Some experts, including prominent investors and even Goldman Sachs, predict gold could touch $4,000–$5,000. I don't share that view. I believe gold has already peaked. Instead, I'm more bullish on silver, which has industrial uses—especially in EVs and electronics. Gold is more of a store of value and is driven by sentiment, while silver is increasingly relevant for future-facing industries.
If you're looking at precious metals, silver and other rare earths have more upside potential, though access to some of these materials is still limited in public markets.
Q. Donald Trump's repeated tariff announcements are shaking markets. Goldman Sachs estimates US inflation could hit 4% this year, with tariffs contributing significantly. The Fed has paused rate cuts, and US yields are already higher than most G10 nations. What's your take?
Abhishek Banerjee:
What's changed is perception. Earlier, Trump's tariff moves seemed calculated, even strategic—some thought Elon Musk might be influencing them. But with their differences now out in the open, that perception has shifted. People are beginning to question whether these are smart moves or simply political posturing.
Importantly, the market still treats tariffs as temporary negotiating tools. But I believe they're becoming permanent. That means higher baseline prices and stickier inflation. While central banks may cut rates in the near term, we could see reversals if inflation doesn't ease.
For India, though, this uncertainty presents an opportunity. We're benefitting from lower oil prices, growing exports—especially in defence and electronics—and higher tax collections. The government has offered relief to middle-income earners, and corporate balance sheets are flush with cash.
India has around ₹10 lakh crore in corporate reserves, and we're beginning to see that being deployed in capex. Over the next 4–6 quarters, as that money is converted into productive assets, India could add $1 trillion to the economy—moving from a $4 trillion to a $5 trillion economy faster than expected.
China's inflation has remained below 1% for over two years, despite fiscal and monetary stimulus. What's going on?
Abhishek Banerjee:
China's biggest growth engine—real estate—is struggling. With population growth slowing and urbanization largely complete, marginal demand is hard to stimulate. Meanwhile, China has overcapacity in manufacturing—they're extremely efficient, and there's little room left to extract more gains.
While valuations looked attractive recently, it's risky—like catching a falling knife. China has fiscal and FX space to act, but they're also distracted by geopolitical tensions, trade wars, and a focus on military engagement. Amid all this, India has a relative advantage and looks far more promising for investors in the near term.
Which sectors are likely to benefit in the near term?
Abhishek Banerjee:
Auto and consumer sectors are immediate beneficiaries. With April salary hikes and tax relief, consumers have more disposable income. That translates into car purchases, home upgrades, and premium consumption—travel, electronics, etc.
Real estate could also benefit. On the flip side, pharma and IT services face headwinds. IT services in particular are under structural pressure despite some FX-driven margin improvements.
Q. What's your take on microcaps? Brokerages seem bullish.
Abhishek Banerjee:
We've always been bullish on microcaps—they're our specialty. The SME segment alone has given 65% CAGR returns, though it's a high-risk space with some stocks losing 98% of their value while others gain 35x.
It's a stock picker's market. Many smaller companies are undervalued simply because they've lacked investor attention. Now, with stretched valuations in large and midcaps, money is trickling down into these overlooked gems.