Neutral on Indian equities, GST reforms to boost consumption
A new report has maintained a neutral stance on the Indian equities, citing GST rationalisation boosting consumption and dollar weakness supporting emerging market (EM) equities and commodities.
SBI Mutual Fund held a ‘neutral to cautious’ stance regarding debt, attributing this to slowing tax revenues and shift in institutional allocations. In the fixed income universe, the fund house anticipates volatile yields and preferred short-tenor high-grade bonds.
“The GST overhaul should aid domestic economy by revitalising consumption. On the trade front, fast-tracking trade deals, improving India-China relations, lowering import tariffs on inputs, and easing FDI norms are already in progress,” the fund house noted.
MSCI India has declined 10 per cent over the past 12 months, while MSCI EM has increased by 18 per cent. G-sec yields increased significantly from June to August, with the 10-year rising from 6.19 per cent to 6.57 per cent.
On the macro-economic front, India's real GDP increased by 7.8 per cent in Q1 FY26, while nominal growth decelerated to 8.8 per cent, impacting corporate earnings, it said.
Exports are under new pressure due to high US tariffs, and reduced government spending weighing on growth, the report said, adding that the government may be keen to undertake transformational reforms to push growth higher.
Emerging market equities, industrial metals and precious metals have outperformed this year, with gold continuing to be a preferred hedge against stagflation risks and geopolitical uncertainty.
Global trade volumes risk stagnation unless China or the European Union boost demand, the report said.
The GST reforms are expected to reduce complexity, improve compliance, and lower costs for businesses-especially MSMEs, the fund house said. Importantly, consumers benefit from rate reductions on a large number of daily-use items, small cars, two wheelers, health insurance, farm equipment and cement amongst many other categories, it noted.
SBI's research wing has earlier said that a consumption boost of Rs 5.5 lakh crore will generate an additional Rs 52,000 crore in GST revenue in FY26, easily offsetting the projected revenue loss of Rs 45,000 crore from GST 2.0 reforms
