Despite ongoing global uncertainties, the medium-term outlook for Indian equities remains constructive, supported by domestic growth drivers and policy support, a report said on Wednesday.
The report by HSBC Mutual Fund said India’s growth remains resilient amid significant global macroeconomic challenges, and this resilience is expected to continue due to softening crude oil prices and other domestic factors.
A normal monsoon, along with a favourable interest rate and liquidity cycle, are other factors expected to drive growth forward, the report said.
“Although global trade-related uncertainty remains a headwind to private capex in the near term, we expect India’s investment cycle to be on a medium-term uptrend, supported by government investment in infrastructure and manufacturing, a pickup in private investments, and a recovery in the real estate cycle,” the report said.
The fund house highlighted positive market trends such as a recovery in private capex, strong demand for real estate in metropolitan cities and favourable global commodity prices.
“We expect higher private investments in renewable energy and related supply chains, localisation of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth,” HSBC Mutual Fund said.
Industry capacity utilisation, based on RBI survey data, is at a reasonably high level, and continued expansion of the Production Linked Incentive (PLI) scheme could lead to an increase in private capex, the report forecast.
The GST rate cut announced by the government, along with previously announced income tax rate cuts, should significantly help boost private sector consumption and support private capex amid current global uncertainty, it added.
Benign global prices of crude oil and fertilisers have been positive for India from an inflation, fiscal deficit and corporate margins perspective in FY25, the report said.
However, the fund house noted that reciprocal tariffs announced by the US administration are likely to impact the US and global growth outlook.
The easing of policy rates by the US Federal Reserve allows the RBI room to further cut policy rates and support domestic growth, given the external challenges, it added.
— IANS
