India's Economic Boom: Private Capex Revival Fuels Stock Market Optimism

HSBC Mutual Fund also cited rising investments in manufacturing, renewables and supply‑chain localisation that support earnings visibility and market performance through 2026.

"We believe India's growth remains quite resilient despite the global macro-economic challenges. Interest rate and liquidity cycle, decline in crude prices and normal monsoon are all supportive of a pick-up in growth going forward," the report said.

The fund house highlighted that Nifty valuations are modestly above 10-year average.

The Reserve Bank of India appears close to the end of its easing cycle with latest cut of repo rate to 5.25 per cent and liquidity is expected to remain supportive through open market operations and other measures, the report maintained.

Heavy government borrowing could keep bond yields volatile in the near term even, it said, adding that the medium‑term outlook for government securities is positive, particularly if inclusion in global bond indices strengthens foreign inflows and demand.

The mutual fund said Indian markets closed December 2025 on a resilient footing despite global volatility, helped by a growth‑friendly RBI stance and strong domestic fundamentals. The 8.2 per cent GDP growth in Q2 FY26, a sharp rebound in industrial output and stable GST collections were among the positives of domestic fundamentals.

While foreign institutional investor (FIIs) outflows reduced their investment in Indian equities in December, selling stocks worth $2.6 billion, strong domestic institutional flows and easing crude prices provided stability.

Softer crude prices, easing global rates and policy support through tax and GST cuts are expected to further support consumption and investment, the fund house predicted.

On the debt market front, the firm forecasted the fixed income markets to consolidate, "with wide trading ranges and higher volatility," as the economy approaches end of the easing cycle.

- IANS