When asked when the broader market might finally catch up, Bagga said the day’s volatility itself was a reminder of the underlying fragility. “Yes, all of us are waiting for that and today has been quite volatile. The way the market did a gap up opening, we thought it will carry on from there, but we saw some amount of fall in the market coming through,” he noted.
According to him, the triggers were largely global. A surprise signal from Japan’s central bank rattled sentiment, with the governor hinting at a possible rate hike in December. That, combined with weak manufacturing readings across Asia—including India’s own softer PMI—fed risk aversion.
Bagga added that the sharp slide in the rupee only worsened the mood. “It was a bit of a surprise and we were expecting RBI to step in but that was not very evident right from the opening and that then spooks the FIIs,” he said, stressing the currency’s tight correlation with foreign flows. Domestic data didn’t provide comfort either. While headline GDP remains strong, he flagged concerns around the underlying trend. “Core GDP is not so good, nominal GDP is leaving a lot to be wanted… we do need some kind of stimulus to get the economy moving at 10 or if possible 11% nominal growth,” he said.
MPC Expectations: “This is the Time for Monetary Heavy Lifting”
With the RBI’s policy meeting around the corner, Bagga believes the macro backdrop leaves space—perhaps even urgency—for a rate cut. GST collections for November showed only marginal year-on-year improvement, and tax revenues continue to lag budget assumptions.
He explained why seasonal distortions may have also played a role: “It is best to take a quarter… because the festivals move year on year… that might be one of the reasons for the GST not growing too fast.” But the broader issue, he said, is the shortfall of nearly ₹2.5 lakh crore in tax receipts, forcing the government to curb spending.
Government expenditure fell 2.5% in the latest GDP reading, a trend that could hurt growth momentum if continued. With fiscal action likely only after the Union Budget, Bagga believes the RBI must act first. “So, keeping all this in mind… there is space for RBI to cut. So, I would say they should cut in December… this is the time for the monetary heavy lifting to come in,” he said, favouring a 25-basis-point reduction.
Motor Insurance: Higher Compliance Helps, But Profitability Still a Challenge
On the potential gains for general and motor insurers from stricter enforcement of vehicle insurance renewals, Bagga said the benefits would depend on whether the compliant pool expands meaningfully. “Yes, it will help if the pool of cars and vehicles getting insured increases with better compliance,” he said.
However, he cautioned that motor insurance remains a loss-making product because of high claim ratios and widespread fraud. For insurers, scale can ease pressure, but not erase structural challenges. “If we can double the pool… hopefully the insurance reduces for the entire population,” he added.
Bagga also expressed surprise at the low penetration level: “Frankly, I am very surprised by this 50% penetration, I expected higher and it will help the entire segment.” According to him, compliance is relatively stricter in metros, suggesting much of the uninsured base consists of older or non-urban vehicles.
