Extended Economic Slowdown Expected:
Maneesh Dangi, the CEO of Mosaic Asset Management, predicts that India's ongoing economic slowdown will last for at least another year and a half, contrary to the more optimistic views of many market participants. He believes the country is in the midst of a cyclical slowdown, which is a recurring phase in the economy. Dangi explains that such slowdowns typically last for five to seven quarters and do not recover without substantial external support or policy stimulus. This longer-than-expected period of sluggishness means that, compared to the bullish expectations held by many, most economic indicators will likely disappoint in the short term.

Lack of Major Fiscal Stimulus:
Dangi is cautious about the possibility of a major fiscal stimulus from the Indian government, citing several constraints. He points out that the government is tied to global expectations about fiscal policy, especially regarding public debt to GDP ratios, which have not improved following the COVID stimulus. Additionally, he mentions that promises made by the government, such as Delhi's fiscal deficits, also limit the scope for further fiscal spending. The central bank, RBI, is also restricted in its ability to cut rates due to the pressure on the Indian currency, further complicating the situation. These factors combined make it unlikely that the government will provide a large fiscal boost in the near term.

Corporate Results Reflect Slowdown:
Dangi notes that the slowdown is already reflected in the last two quarters of corporate results. The margin levels, which were elevated just a couple of quarters ago, have been under pressure as economic growth remains sluggish. He explains that during periods of cyclical slowdowns, it's challenging to maintain elevated margins, and the current economic environment makes it unrealistic to expect a return to those high levels of profitability. This trend has surprised some market participants but is expected given the broader slowdown in economic activity.

Sector-Specific Outlooks:
Dangi provides a more detailed outlook on specific sectors, noting that while banks are currently better priced, they are struggling with margin pressure. This is largely due to a slowdown in the rapid credit growth that had previously been a significant driver for the banking sector. On the manufacturing side, Dangi expects tradable goods to face significant deflationary pressures, especially if the US were to introduce tariffs. Despite these challenges, he remains positive on the IT sector, which he believes has strong potential due to its agility and ability to benefit from the ongoing AI and robotics race between the US and China. However, he acknowledges that there could be collateral damages in the sector due to broader geopolitical tensions.

Long-Term Growth Outlook:
While acknowledging the near-term cyclical challenges, Dangi remains optimistic about India's long-term economic prospects. He forecasts that India will grow at a rate of 5.5-6% over the next 5-10 years, suggesting that the country’s growth trajectory remains intact despite the current slowdown. Dangi stresses the importance of managing the current challenges effectively and notes that, although the economy may face headwinds in the short term, the broader picture for India’s growth remains favorable.