Axis Asset Management’s chief investment officer, R.
Sivakumar, has identified a sluggish growth environment as the principal factor behind the recent underperformance of Indian equity markets and sustained foreign institutional outflows.
While the monsoon season began with a significant shortfall driven by persistent El Niño conditions, Sivakumar argues that the macroeconomic impact is being misattributed by investors focused solely on weather patterns.
The investment manager contends that the primary threat of a poor monsoon is a decline in agricultural output, which subsequently reduces rural incomes.
However, he maintains that this dynamic is unlikely to trigger runaway food inflation, a scenario that has historically spooked foreign investors and pressured the rupee.
Instead, the broader slowdown in economic activity is weighing more heavily on corporate earnings expectations and market sentiment.