Despite the rally in headline indices, the long-awaited broad-based rally in India’s equity markets has remained elusive. Speaking to ET Now, a market expert Ajay Bagga It pointed to a mix of global pressures, inconsistent domestic macros and currency volatility that kept investors on edge during Monday’s trading session.

When asked when the broader market will finally catch up, Bagga said the day’s volatility itself is a reminder of the underlying fragility. “Yes, we are all looking forward to it and today has been very volatile. The way the market opened gap up, we thought it would go from there, but we saw a slight decline in the market,” he noted.

According to him, the triggers were mostly global. A surprise signal from Japan’s central bank shook sentiment, with the governor hinting at a possible rate hike in December. That, coupled with weak manufacturing readings across Asia—including India’s own soft PMI.

Bagga added that the sharp decline in the rupee only worsened the mood. “It was a bit of a surprise and we expected the RBI to take action but it was not clear from the start and then it scared the FIIs,” he said, stressing the currency’s tight relationship with foreign inflows. Even the local data is not comforting. While headline GDP remains strong, it has raised concerns around the underlying trend. “Core GDP is not that good, nominal GDP leaves a lot to be desired… We need some kind of stimulus to push the economy to 10 or 11% nominal growth if possible,” he said.

MPC Expectations: “It’s Time for Monetary Heavy Lifting”

With the RBI’s policy meeting around the corner, Bagga believes the macro backdrop leaves room—perhaps even urgency—for a rate cut. GST collections for November showed only a marginal improvement year-on-year and tax revenue lagged behind budget expectations.

He explained why seasonal distortions could also play a role: “It’s best to take a quarter… because festivals move every year… That could be one of the reasons why GST doesn’t rise too fast.” But the broader issue, he said, is a shortfall of about ₹2.5 lakh crore in tax revenue, forcing the government to rein in spending.

Government spending fell 2.5% in the latest GDP reading, a trend that could hurt growth momentum if it continues. Since fiscal action is likely to take place only after the Union Budget, Bagga believes the RBI should act first. “So, keeping all this in mind… there is room for the RBI to cut. So, I would say they should cut in December… This is the time for the monetary heavy lifting,” he said, advocating a 25-basis-point cut.

Motor insurance: High compliance helps, but profitability remains a challenge

On the potential benefits for general and motor insurers from stricter enforcement of vehicle insurance renewal, Bagga said the benefits would depend on whether the eligible pool expands meaningfully. “Yes, it would help if car and vehicle insurance increases with better compliance,” he said.

However, he warned that motor insurance is a loss making product due to high claim ratio and widespread fraud. For insurers, scale can ease pressures, but not erase structural challenges. “If we can double the pool … hopefully insurance will go down for the entire population,” he added.

Bagga also expressed surprise at the low penetration level: “To be honest, I am very surprised with this 50% penetration, I expected more and it will help the entire segment.” According to him, compliance is relatively strict in metros, suggesting that the bulk of the uninsured base consists of old or non-urban vehicles.