Bajaj Alts' Jitendra Gohil backs discretionary consumption and banks amid strong macro setup

India's macroeconomic environment is presenting a strong setup for the next six to nine months, driven by robust tax collections and upcoming domestic and global catalysts, according to Jitendra Gohil, CIO-Listed Equities at Bajaj Alts. To capitalise on this favourable backdrop, investors should focus on discretionary consumption sectors and banks.

Several trigger points are aligning to support the domestic market. The festive season build-up has been positive, coinciding with the start of Navratri. Goods and services tax (GST) collections have increased by 14% to 15% over the last two months, while net direct tax collections are up approximately 31% year-to-date. Beyond domestic consumption, potential stimulus spending in the United States ahead of its November midterm elections could provide an additional tailwind. Looking further ahead, the Uttar Pradesh elections next year and the implementation of the Eighth Pay Commission are expected to act as key catalysts.

The country's bond market performance also stands out against global peers. "If I look at next six to nine months, it's a very good, I think a perfect setup for India where macro is very strong and there are multiple catalysts," Gohil noted. While Indian yields have recently seen a 10 to 20 basis point surge, they have remained relatively stable since February 28, outperforming developed markets.

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Translating this macroeconomic strength into sector-specific ideas, the focus shifts to discretionary consumption over the next six months. Although cost pressures are expected to set in, the auto sector remains in a decent position. Consumer durables are performing adequately, and the broader retail sector is showing promise. Malls and multiplexes, in particular, have demonstrated business improvement over the past couple of months.

Alongside consumption plays, financial stocks present an attractive opportunity based on current valuations. Banks are looking strong for the next three to six months.

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