Indian equities to perform well in medium-term amid policy support, strong private capex
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 from HSBC Mutual Fund said that India’s growth remains resilient amidst significant global macroeconomic challenges and resilience is expected to continue due to the softening in crude oil prices and other domestic factors.
A normal monsoon, a favourable interest rate and liquidity cycle are other factors expected to drive the 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, pickup in private investments and a recovery in 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 chain, localization of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth," HSBC MF said.
Industry capacity utilization based on RBI survey data is at a reasonably high level and continued expansion of the Production Linked Incentive (PLI) scheme could lead to increase in private capex, the report forecasted.
The GST rate cut announced by the government along with the previously announced income tax rate cuts should significantly help boost private sector consumption and help support private capex in the current times of global uncertainty, it added.
Benign global prices of crude oil and fertilizers have been positive for India from inflation, fiscal deficit and corporate margins perspective in FY25, it said.
However, the fund house maintained that the reciprocal tariffs announced by the US administration is likely to impact US and global growth outlook.
US Fed easing policy rates allows RBI room to further cut policy rates and support domestic growth given the external challenges, it noted.
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