QUARTERLY UPDATE – JULY TO SEP 2025

A Quarter of Contrasts

"Uncertainty, actually, is the friend of the buyer of long-term values."

— Warren Buffett

The July–September 2025 quarter truly embodied this idea. A period of contrasts and market swings. Globally, optimism was building as investors grew confident that central banks were moving toward rate cuts, driving steady gains in major equity indices. Tech and AI sectors provided strong momentum, while easing trade tensions added to positive sentiment.

In India, the story was more turbulent. Capital outflows, currency pressures, and uneven sectoral performance created volatility, even as domestic equity funds continued to see net inflows. Market indices experienced pressure, reflecting a mix of global headwinds and domestic uncertainties, but long-term growth fundamentals remained intact.

Global Backdrop & Macro Trends

Indian investors and advisors must read both the signals and the noise to navigate this environment.

Key Global Themes:

1. Central Bank Policies: Around the world, investors hoped central banks would start lowering interest rates, as inflation showed signs of cooling. This optimism helped global markets rise. However, rate cuts are still uncertain, and many countries are cautious.
2. Equity Market Trends: Stock markets in some countries stayed strong thanks to good earnings in sectors like technology and manufacturing. But the gains weren’t uniform, only certain themes and sectors attracted investors.
3. Currency and Capital Flows: The U.S. dollar weakened a bit, helping emerging markets. Still, capital flows were volatile, and India saw some foreign investors pulling money out, which put pressure on the rupee.

What This Meant for India?

• Economy Held Up, But Markets Were Uneven

India’s economy remained strong with steady growth, controlled inflation, and ongoing infrastructure investment. However, foreign investor sentiment was cautious, which made Indian equities more volatile.

• Capital Outflows and Currency Pressure

Foreign institutional investors reduced exposure to Indian stocks, slightly weakening the rupee. Domestic investors, mutual funds, and retail participation helped absorb some of this pressure.

• Sectoral Differences

Not all sectors moved together. Domestic growth sectors like infrastructure, capital goods, and consumer products performed well, while export-oriented sectors like IT and pharma were under pressure.

• Domestic Strength as a Support

India’s strong domestic market, ongoing government support, and potential rate cuts could help stabilize markets in the coming months.

Trump Tariffs and India – Q3 2025 Impact

• The U.S. administration’s decision to impose tariffs of up to 50% on Indian goods in mid-2025 hit exports hard, particularly in textiles, gems & jewellery, and auto components. India’s exports to the U.S. fell nearly 38% between May and September, cutting into overall trade growth and shaving an estimated 0.3 to 0.5 percentage points off GDP forecasts. Foreign portfolio outflows also increased as investors turned cautious on external balances.
• Despite this, India’s domestic demand and macro fundamentals remained resilient. Inflation stayed low, giving the RBI policy space, and the government accelerated export diversification toward markets like UAE, Bangladesh, and Europe. While near-term trade pain persists, India’s broad consumption base and manufacturing reforms have helped limit the damage. Markets are now watching for U.S. - India tariff negotiations that could ease pressure in coming quarters.

India’s GST Reduction and Its Impact

India recently simplified GST rates, effective September 22, 2025, moving to just two main slabs 5% and 18%. This replaced the earlier 12% and 28% rates for most goods and services. Along with lower rates, the government has made compliance easier, introduced pre-filled returns, and promised faster refunds, a big help for MSMEs and startups.

What This Means for the Markets?

• Higher Consumption: Lower GST on essentials, durables, and vehicles may encourage people to spend more, benefiting sectors like FMCG, automobiles, and consumer electronics.
• Sector Growth: Consumer-driven industries, such as FMCG, auto, durables, insurance, and construction could see higher sales and revenues, potentially boosting India equity earnings by ~1% in FY26.
• Positive Market Sentiment: The announcement lifted investor confidence, with markets bouncing back, similar to tax-cut led rallies in 2019.
• Foreign Investor Appeal: Easier compliance and pro-business reforms may attract more foreign investment, supporting India’s long-term growth story.

Bottom Line: The GST cut is fueling a pro-consumption rally in the markets, particularly benefiting sectors linked to household spending, while strengthening India’s position as a resilient emerging market.

How India Stands Amid Global & Domestic Trends

India continues to be one of the fastest-growing and most resilient major economies in the world.

• Strong Growth: GDP is expected to grow around 6.4–6.6% in FY25 and 6.5–6.8% in FY26, supported by consumption, investment, and infrastructure spending.
• Healthy Economy: Inflation is under control, bank health is strong, and domestic demand remains robust. Manufacturing, services, and digital sectors are expanding steadily.
• Global Position: Exports, especially in services, electronics, and pharmaceuticals, are rising, and foreign investments continue to flow in, strengthening India’s external position.
• Risks and Resilience: While global uncertainties and energy costs pose challenges, India’s broad-based economy and proactive policies provide a strong buffer.

Bottom Line: India’s growth story remains intact, supported by strong domestic demand and a healthy macroeconomic backdrop, making it well-positioned amidst global and domestic challenges.

Our Approved Products in last quarter:

PMS Category:

This quarter, we approved two new PMS strategies from Motilal Oswal Asset Management –

1. Motilal Oswal Founders Portfolio:

Rationale: This portfolio has been approved as part of the thematic equity allocation, focusing on founder- and promoter-led companies. The underlying philosophy is that businesses driven by committed founders tend to demonstrate superior long-term performance, owing to their entrepreneurial vision, agility in decision-making, and focus on sustainable value creation.

The strategy seeks to capitalize on India’s entrepreneurial strength and the expanding contribution of founder-led enterprises across key sectors such as financials, manufacturing, and consumer businesses. It emphasizes companies with proven governance standards, scalable business models, and consistent capital allocation discipline.

Suitability: Managed by Motilal Oswal’s experienced investment team, the portfolio combines the firm’s bottom-up stock selection expertise with a high-conviction, concentrated approach. This makes it suitable for long-term investors looking to participate in India’s growth story through a focused basket of quality, promoter-driven businesses with a strong track record of execution.

2. Motilal Oswal Mid to Mega Strategy for US/Canada based clients.

Rationale: This strategy is recommended as part of the core India equity allocation for US/Canada-based investors seeking long-term participation in India’s structural growth story. The portfolio aims to capture opportunities across the mid to large-cap spectrum, combining the high-growth potential of mid-caps with the stability and resilience of established large-cap leaders.

The approach follows Motilal Oswal’s “Buy Right – Sit Tight” philosophy, built on deep fundamental research, high-conviction stock selection, and disciplined portfolio construction. The emphasis is on quality businesses with scalable models, strong balance sheets, and superior earnings visibility, positioned to benefit from India’s ongoing economic formalization, rising consumption, and capital expenditure cycle.

Managed by a seasoned investment team with a strong track record across market cycles, this strategy provides a well-diversified exposure to India’s long-term growth while maintaining a measured risk profile.

Suitability: It is particularly suited for global investors looking to participate in India’s growth through a professionally managed, India-domiciled equity portfolio with a blend of growth and stability characteristics.

Both strategies align with the themes of “Hi-Quality, Hi-Growth” investing and bring differentiated exposure to India’s evolving equity landscape.

AIF Category:

PGIM India Equity Growth Opportunities Fund:

Rationale: This product is being recommended as part of the small and micro-cap allocation within the equity portfolio, with the objective of enhancing long-term alpha potential. The fund follows a disciplined approach to identify emerging growth opportunities among companies with market capitalization between ₹500 crore and ₹25,000 crore an under-researched segment where mispricing and valuation gaps often exist.

The fund’s investment framework emphasizes robust qualitative and quantitative filters including scrutiny of cash flows, promoter integrity, leverage, and forensic checks to mitigate the higher inherent risks of this segment.

Importantly, the strategy is led by Aniruddha Naha, a seasoned fund manager with an established track record in the small and mid-cap space, known for his ability to generate consistent alpha while maintaining prudent risk controls.

Suitability: Given its higher volatility and potential for superior long-term returns, the fund is suitable for aggressive investors with a long-term investment horizon who can tolerate short-term fluctuations in pursuit of wealth creation.

Advisor’s Corner: Navigating the Noise

The past few months have been a bit of a roller coaster globally. It’s only natural to feel uneasy when markets swing sharply in response.

During such times, it helps to step back and remember a few simple truths:

• Stick to your plan. Your portfolio is built around your goals and risk profile not the market’s mood.
• Volatility isn’t the enemy. It’s what gives you the opportunities to buy quality businesses at fair prices.
• Focus on long term.

So, while the world around us may look noisy, the best thing you can do is stay disciplined, stay invested, and stay patient.

In times like these, perspective matters more than predictions — and we’re here to help you keep that perspective.