Consumption rebound to drive best Nifty earnings in over 2 years, more rate cuts needed: Saurabh Mukherjea

India’s consumption economy appears to be turning a corner, with Q3 (Oct–Dec) shaping up to be the strongest earnings quarter for Nifty companies in nearly two-and-a-half years, says Saurabh Mukherjea, Founder of Marcellus Investment Managers.

Mukherjea told ET Now that October was “spectacular” for consumer-facing sectors, with autos, FMCG and durables showing clear improvement, while November remained steady. He expects Nifty earnings for Q3 to approach 10% growth, a big jump from the 1% seen in the September quarter.

Middle class needs urgent relief: More rate cuts + direct tax cuts

Mukherjea welcomed RBI’s signal of further rate cuts but argued that the middle class is still under intense pressure due to:

• High debt levels
• A tight job market
• Slow consumption growth

He believes India needs another 100 bps in rate cuts along with fresh direct tax relief in the upcoming budget.

He suggests the government should throttle back ₹2 trillion in capex to fund a higher zero-tax income limit—lifting the current ₹12 lakh threshold to ₹15 lakh.

“Consumption is 60% of GDP. The 40 million taxpayers are the engine of this economy. Giving them relief is essential,” he said.

Capex slowdown may be necessary

With government capex already hitting the ₹10 trillion operational ceiling, Mukherjea says India must temporarily ease capex to stimulate consumption.

“It’s a clear trade-off. We simply don’t have the capacity for capex beyond ₹10 trillion,” he noted.

Trent still a strong long-term bet despite valuation worries

Mukherjea remains bullish on Trent, one of Marcellus’ portfolio favourites, even after the stock fell 40–45% from peak levels.

Why? It is because Trent has delivered stronger same-store sales growth than rivals and continues rapid store expansion. It also appears reasonably valued after adjusting for expansion-led earnings distortion

“If the government continues its supportive moves, Trent will be a key beneficiary,” he said.

Broader earnings set to improve if consumption holds up

Beyond Nifty companies, Mukherjea sees encouraging signs across the broader market:

• BSE 500 / NSE 500 earnings were already up ~10% in September quarter
• Consumption-sensitive sectors will likely lift the entire earnings landscape

He expects a broad-based recovery in 2026 if policy support continues.