GST 2.0, monetary easing (which appears set to become even easier), and resumption of trade talks with the US seem to be aligning. After more than a year of flat returns and underperformance relative to EM peers, Indian equities look set for a cyclical pickup over the next quarter or two.

The argument is straightforward: GST-led disinflation and demand-push, lagged effects of easier rates on consumption, a potential thaw in stressed lending and early signs of private capex bottoming could collectively rekindle earnings growth and market breadth. Is it finally time to start believing?

Evidence is tangible. Estimates place disinflation from GST 2.0 between 25 and 130 bps, a non-trivial improvement that could make up for the run-up in food inflation following excess monsoons. Real incomes would benefit. Consumption of services and discretionary goods are likely to get a lift.

With over 60% of India's GDP driven by domestic consumption, the economy is expected to get a boost of anywhere between 30 and 60 bps, depending on how much of benefits are passed on by businesses to consumers. On cue, green shoots are visible in select high-frequency indicators: falling unemployment, improving consumer sentiment, and pockets of strength in retail and automobile demand. That said, what gives?

Monetary policy matters

We face a catch-22 situation. How can RBI act on one-year-ahead inflation forecasts in a dynamically evolving environment where its decisions today have a strong bearing on inflation one year down the road? RBI also faces renewed pressure for rate cuts, following last week's 25 bps cut by the US Fed. Of course, RBI will be data-driven. But sequencing matters - premature loosening can reignite price pressures, while delays risk throttling a fragile recovery.

Credit dynamics are key

Theory says lower rates, plus healthier bank balance sheets, should ignite private capex. In practice, capex revives only once banks show sustained appetite to lend and corporate confidence returns. Corporate confidence hinges on robust demand. Meanwhile, the bottoming out of stressed assets - and steady decline in provisioning - will be the clearest signal that capital can shift from repair back to productive investment.

Sentiment matters

Markets dislike surprises. Pockets of the market already look priced to perfection. To be sure, cyclicals such as capital goods, select private banks and discretionary retail would likely lead if demand and margins normalise. That said, rotating aggressively into these sectors without watching earnings revisions, order-book data and credit flow is like stepping onto a bridge before checking the supports.

So, what should investors watch?

GST effect and fiscal sequencing

The 30-60 bps estimate is wide. Hit to growth from US tariffs, timing and pass- through specifics will be key.

Credit growth and stress indicators

Falling NPAs and stable provisioning will validate a lending revival.

Consumption signals

Real wage growth and changes in employment and discretionary sales will show whether disinflation translates into demand.

Capex markers

Capacity utilisation, order books, new project announcements, corporate lending growth and capital-goods imports will confirm a private-capex upswing.

Global policy divergence

Any sustained US-India central-bank divergence will influence capital flows and the rupee, while delays in the US- India trade deal beyond November can strain sentiment.

Positioning should be disciplined. This is anybody's guess in the near term. Impact of policy and cyclical forces is non-linear. That said, a reasoned approach is to start positioning for a cyclical recovery while respecting risk management: build conviction positions where earnings-revision visibility is improving, use staggered entries into more stretched cyclicals, and keep a cash cushion for policy or geopolitical shocks.

Of course, the time horizon matters. Tactical allocations for 3-6 months differ from strategic allocations for 3-5 years. Use systematic rebalancing and earnings-revision signals to guide moves.

Sequencing and data will decide how   quickly markets gain conviction. Watch the data points above. Treat positioning as a process, rather than a moment.

The writer is founder, Credibull Capital.