India’s economy has been characterized by robust fundamentals, prudent macroeconomic management and the capacity to withstand significant shocks. India’s GDP rate is expected to grow at 6.3% in 2025-26, pegging it amongst the fastest growing major economies in the world. Despite uncertainties around geopolitical tensions and escalations around global tariffs India’s markets posted a recovery after facing a short-term blip.
Robust domestic fundamentals, supported by prudent macroeconomic management and supported by strong capex spending have defined the growth of the Indian economy; a trend that we expect to see continuing, going forward. This growth has also led to increased valuations across the markets, also leading to elevated levels of risks when it comes to investing. A relatively stable Rupee even in the wake of the recent tariff situation has remained reflective of the nation’s resilience.
The chart above, gives us an insight into how previous shocks have impacted the country. Take for example the dotcom bust in 2000, The impact on India’s stock markets were far less severe, owing to our underexposure to the sector. RBI’s rate cut cycle and the 50 basis point cut that came through during the MPC meeting in June will lead to a further infusion of liquidity into the system.
India’s capital markets; the fourth largest in the world, reflects the transformative power of the nation’s financial ecosystem. Over the years, digitization and automation of trading and investing; globally led by NSE, later led to the adoption of these technologies across international exchanges. As per recent data, young investors lead the mantle when it comes to investing, with over 40% of investors falling under the age of 30. With retail investors spearheading the markets and household wealth witnessing a significant increase, India has remained a disruptive force in capital markets, even more so, as regulators proactively craft frameworks that support advancements.
Uncertainties exist in the form of the market volatility, led by macroeconomic and geopolitical tensions. While some uncertainties could turn into an opportunity for India, some risks that remain unforeseen include geopolitical tensions, increasing bond yields in the US and the re-emergence of Covid that we’ve witnessed over the recent past.
Strong private consumption, especially the rural rebound, and robust services exports remain the primary engines of growth. The services sector continues to post healthy expansion, offsetting some of the softness in merchandise exports. We believe that the next period should see growth style of investing having an edge over the value style. We expect this growth cycle to continue onto the next quarter, even as valuations, especially within pockets of small and mid-cap stocks are witnessing a rise. With the earnings season coming to an end and the outcomes remaining in line with expectations, we think that this is a great time for people who want to invest during market dips. A long-term strategy will be supported by the market, broadly leading to a positive investment experience.
