New labor laws can put India on a pro-business growth path: Karthikraj Laxmanan

A new set of labor reforms released over the weekend has prompted market participants to reassess long-term expectations for the Indian economy. While the changes are seen as significant structural improvements, the Street is still trying to understand how they translate into sector opportunities. In a conversation involving labor policy, manufacturing prospects and global market dynamics, UTI AMC’s Karthikaraj Laxman in an interview with ET Now offered a grounded view on how investors should approach the evolving landscape.

The debate began with the broad impact of the new labor law and whether it marks a meaningful change for businesses.

“No, labor laws, I mean as long as it is pro-business and at the same time takes care of labor protection, it is in the right direction and that is what we are clearly seeing and that seems to be the case,” Lakshmanan said. He added that the reforms will affect businesses differently, with some likely to benefit more than others. “We don’t necessarily have to play in every event, but we believe that as long as it’s positive for business, it should be positive for the markets overall.”

The conversation then moved on to manufacturing as a structural theme – an area in which India is positioning itself more strongly in global supply chains, especially with the possibility of an India-US trade deal at some point gaining more relevance.

“I mean, clearly manufacturing is an area of ​​focus for the government as well and it’s something that we clearly need to work on to create a lot of jobs,” he said, highlighting the demographic advantage that India has. From auto to pharma, chemicals to EMS, multiple verticals benefit. But Laxman stressed that his approach remains fundamentally bottom-up: “In terms of the bottom-up space we have exposure to most spaces from pharma, chemicals, EMS, auto etc.”

Global markets, particularly the US, continue to cast a long shadow over domestic sentiment. With speculation surrounding the Fed’s next move and profit-taking in the Magnificent Seven, the question is whether India will be able to hold its ground if volatility rises abroad.

“The difference is, I mean, the top seven companies are in a very good position. They’ve generated a lot of cash flow,” he noted, acknowledging ongoing debates about an AI bubble forming. However, he cautioned that a sharp correction in the US could still spill over into other markets, including India. At the same time, he pointed out that emerging markets today look relatively attractive compared to the US—and that India, while a little more expensive, offers better entry points than a year ago thanks to cooling valuations and a softer rupee.

To clear the pockets, Lakshmanan was unfazed. FMCG, he said, is losing its luster as growth has structurally slowed down despite very strong valuations. “We don’t see many of these companies going back to very high growth again…” he pointed out. Power utilities, too, are signaling caution after heavy reratings that don’t align with their long-term return profiles. “A lot of these utilities don’t generate very high ROC or very high ROA,” he said, adding that the sector’s recent multiples were affected by a short burst of high growth that now appears to be normalizing.

Taken together, Laxmanan’s views suggest the market is at an interesting inflection point – buoyed by structural reforms and sectoral opportunities, but still facing global volatility and valuation concerns. For investors, the message is clear: be selective, be bottom-up and beware of pockets where optimism is ahead of fundamentals.