India's Market Surge: How GST Cuts and Festive Demand Will Reshape Investments

The second half of FY26 will deliver broader market strength, led by financials, consumption, infrastructure, and power sectors, as policy reforms and festive sentiment fuel fresh opportunities, according to the report from investment platform Smallcase.

Renewed FII inflows, credit expansion, and healthy earnings momentum are likely to power the next leg of the market rally, the report said.

Analysts said that microfinance, consumer discretionary, and public sector banks may emerge as key beneficiaries of this trend.

"GST cuts are improving affordability, while rate cuts are easing credit flow. Urban and rural demand is converging, backed by increased electrification, aspirational spending and credit access penetration. Moreover, recent rate cuts will make EMIs fall, making high-ticket consumer goods more affordable," said Robin Arya, Investment Manager, Smallcase, and Founder, GoalFi.

MFIs will see a boost as monsoon-driven rural income and the festive season in H2 FY26 underpin a pickup in fresh disbursements, especially in two-wheeler and consumer durable loans, he added.

The festive period from October to December traditionally drives 35-40 per cent of annual consumption across discretionary categories. Early indicators suggest strong momentum, with e-commerce sales projected at Rs 1.2 lakh crore (up 27 per cent YoY), UPI transactions crossing 20 billion in August 2025, and MSME festive credit demand expected to surge 35-40 per cent to Rs 3.45 lakh crore, Smallcase said.

The RBI has upgraded FY26 growth to 6.8 per cent, citing strong rural demand supported by good monsoon, robust agricultural activity, and gradually reviving urban demand. The government announced Rs 11.21 lakh crore capex allocation for FY26, supporting infrastructure-led growth, particularly benefiting sectors like railways, roads, and urban development.

- IANS