GST can start earnings upgrade cycle for India Inc: Trideep Bhattacharya of Edelweiss MF

The recent GST reforms are emerging as a powerful trigger for Indian equities, says Trideep Bhattacharya, President & CIO-Equities at Edelweiss Mutual Fund. He believes the cuts can kick-start an earnings upgrade cycle for India Inc, with autos, consumption and NBFCs well placed to drive the next market rally.

Edited excerpts from a chat:

Given that the stock market has given near flat returns in the last one year, do you think that most of the time correction is behind us and it is now time to be overweight equities and deploy spare cash?
While markets are currently trading at fair valuations, we expect an earnings recovery to start from Q3FY26, which should support equities over the medium term. In the near term, however, markets may remain range-bound given global and domestic uncertainties. Hence, we believe a “buy on declines” approach remains prudent, and selective deployment is advisable at this stage.

GST is being seen as the biggest trigger for the market in 2025. Would you agree? And how has your portfolio changed since the new GST rates have been announced?
GST reforms is one of the meaningful triggers for markets in 2025 as it could potentially kick-start earnings upgrade cycle for India Inc. While our portfolio positioning reflected the consumption theme since early CY25, with an emphasis on luxury and rural consumption. The recent GST cuts are a strong tailwind, validating our thesis. In addition to luxury and rural consumption, we have also increased exposure to companies catering to mass consumption, where tax benefits should drive stronger demand, in recent times.

Auto is being seen as the biggest sectoral winner of GST reforms. How would you play the auto cycle which in itself is quite broad with tractors, ancillaries, CVs and PVs players?
We view autos as one of the biggest beneficiaries of GST reforms and are currently overweight across portfolios. Our approach has been to invest in leaders across sub-segments—tractors, PVs, CVs, and ancillaries—since leadership matters in both cyclical recovery and long-term market-share gains. Given rising rural demand and improving affordability post-GST cuts, we believe the auto cycle offers both breadth and depth of opportunities for investors.

IT has not only been the worst performing sector of 2025 but the outlook now looks more grim given the noise around the HIRE Bill. Is that a serious threat from a longer term perspective? How much weightage are you giving to IT in your portfolios?
IT has been the weakest sector of 2025, and near-term headwinds such as the HIRE Bill are adding to the uncertainty. While we remain broadly neutral on the sector, we note that valuations have turned reasonable while sentiment is at cyclical lows. We are monitoring developments closely, but at this stage prefer a balanced stance rather than an aggressive underweight.

We will be having the Q2 earnings numbers flowing in a month from now. Do you think the September quarter would be the last of the single-digit earnings growth and we can expect double-digit growth from Q3 onwards?
We expect Q2 earnings to remain lacklustre, largely reflecting muted demand trends. However, we believe management commentary to set the stage for a stronger second half of FY26, as the festive season should drive meaningful demand recovery across sectors. From Q3 onwards, we expect earnings growth to return to double digits, led by consumption, autos, and financials, thereby marking an inflection point in the earnings cycle.

Within the consumption basket, how would you go about picking winning stocks?
Within the consumption basket, our focus remains on cyclical beneficiaries that stand to gain from improving demand and GST-driven affordability. Alongside these, we are selectively identifying winners in emerging consumption areas—such as premium discretionary products, digital-led platforms, and rural aspirational categories. This dual focus on cyclical recovery and structural shifts allows us to capture both near-term momentum and long-term growth opportunities in the consumption space.

Besides consumption and auto, which other sectors do you believe will lead the next leg of market growth, and what’s driving your conviction in them?
Beyond consumption and autos, we are constructive on NBFCs. Valuations are reasonable, balance sheets are stronger, and the sector stands to gain meaningfully as interest rates move lower and demand recovers. NBFCs are also positioned to benefit from rural revival and credit penetration in underserved areas.

If you had Rs 10 lakh to invest in the market right now, how would you spread it across gold/silver, equities and debt?
Asset allocation is highly individual-specific and best discussed with a financial advisor. That said, in today’s environment of persistent inflationary pressures and a tariff-led global order, we believe equities and precious metals such as gold and silver deserve a higher weight in portfolios.

Lastly, what’s the one contrarian idea you’d back for the next 12 months?
Our contrarian idea is India itself. The market has underperformed the region recently due to strains in India-US relations, but we expect these issues to resolve. As that happens, India’s strong earnings drivers—consumption demand, formalisation, and digital-led productivity—will come to the forefront. This makes India an attractive contrarian bet over the next 12 months, with potential for outperformance against both emerging markets and developed peers.