HSBC Report: India's Growth Resilient, Rate Cuts & Low Crude to Aid Pickup

The report stated that interest rate and liquidity cycle, decline in crude prices and a normal monsoon are all supportive of a recovery in growth momentum. It noted that while global uncertainties persist, India's overall growth outlook remains constructive.

It stated, "We believe India's growth remains quite resilient despite the global macro-economic challenges".

According to the report, global trade-related uncertainty continues to remain a near-term headwind for private capital expenditure. However, the report expects India's investment cycle to remain on a medium-term uptrend.

This is likely to be supported by sustained government investment in infrastructure and manufacturing, a gradual pickup in private investments and a recovery in the real estate cycle.

The report further highlighted that higher private investments are expected in renewable energy and related supply chains. It also pointed to localisation of higher-end technology components and India becoming a more meaningful part of global supply chains as key factors that could support faster growth over the medium term.

On the equity market outlook, the report noted that Nifty valuations are modestly above the 10-year average. Despite this, the report said it remains constructive on Indian equities, supported by a more robust medium-term growth outlook.

Outlining the key headwinds, the report said weak global growth is likely to remain a drag on demand going forward.

Global policy uncertainty, including risks of tariffs, mercantilist policies of certain countries and ongoing geopolitical conflicts, is expected to act as a headwind to private investments. Another key risk highlighted was a sharp slowdown in government capital expenditure.

At the same time, the report identified several positives for the Indian market. It said recovery in private capex is likely, as industry capacity utilisation based on RBI survey data is at a reasonably high level, indicating potential for an increase in private investments.

It also outlined that the continued expansion of the Production Linked Incentive (PLI) scheme is also expected to further boost private investments in targeted sectors, along with higher private capex in renewable energy.

- ANI