How are Domestic Equity Markets Responding to Resilient Q1 GDP Data?
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Synopsis
The recent surge in India's domestic equity markets is a direct response to impressive Q1 GDP growth, which reached 7.8% YoY. A report highlights significant advancements in macroeconomic indicators and mutual fund performance, making this a pivotal moment for investors. Find out what this means for the financial landscape.
Key Takeaways
- India's economy expanded by 7.8% YoY in Q1 FY26.
- Services PMI reached 62.9 in August 2025.
- GST Council simplified tax slabs to two rates.
- Equity mutual funds showed positive returns across all categories.
- Credit risk funds excelled in debt mutual fund performance.
New Delhi, Oct 22 (NationPress) The domestic equity markets experienced a significant uptick, buoyed by strong macroeconomic indicators, as India's economy registered a remarkable 7.8 percent year-on-year (YoY) growth in Q1 FY26, representing the most substantial increase in five quarters, according to a report released on Wednesday.
In August 2025, the Services PMI soared to 62.9, its highest point in over 15 years, fueled by a notable surge in new orders and sustained demand.
ICRA Analytics noted that market sentiment was further enhanced as the GST Council streamlined the existing four tax slabs (5, 12, 18, 28 percent) into a simpler two-rate system of 5 percent and 18 percent, while also proposing a special 40 percent slab for select luxury items including high-end automobiles, tobacco, and cigarettes.
Equity markets continued to gain momentum following the US Federal Reserve's first rate cut of the year in September, which was attributed to recent weaknesses in the labor market.
However, overall gains were somewhat restrained due to ongoing uncertainties surrounding India–US trade discussions and persistent outflows from foreign institutional investors in domestic equities.
Additionally, the report highlighted trends within the Equity Mutual Fund sector (as of September), revealing that all categories of equity mutual funds yielded positive average returns over 3-year, 5-year, and 10-year periods. Notably, small cap funds provided the highest average returns over both the 5-year and 10-year spans, while large cap funds experienced a negative average return of approximately 4.92 percent over the 1-year period.
Similar trends were observed in the Debt Mutual Fund category this month. Credit risk funds achieved the highest average returns over the 6-month, 1-year, 3-year, and 5-year periods, while low-duration funds delivered the most substantial average return over 1 month at 18.57 percent.
All categories of debt mutual funds yielded positive returns across 1-year, 3-year, 5-year, and 10-year durations, with credit risk funds producing the maximum average returns over the 6-month, 1-year, 3-year, and 5-year periods.
Point of View
It's vital to recognize the significance of the latest economic data. The strong Q1 GDP growth and the positive shifts in equity markets reflect a resilient economy, despite ongoing challenges. We must remain vigilant and informed as these trends unfold, ensuring we provide our audience with trustworthy insights.
NationPress
23/10/2025
Frequently Asked Questions
What is the current growth rate of India's economy?
India's economy has recorded a growth rate of 7.8% year-on-year in Q1 FY26.
How did the Services PMI perform in August 2025?
The Services PMI surged to 62.9 in August 2025, its highest level in over 15 years.
What changes were made by the GST Council?
The GST Council simplified tax slabs into a two-rate structure of 5% and 18%, along with a special slab for luxury items.
What trends are visible in equity mutual funds?
All categories of equity mutual funds have shown positive returns over various timeframes, with small cap funds leading the way.
What are the trends in debt mutual funds?
Credit risk funds have delivered maximum average returns over multiple periods, including 6-month, 1-year, 3-year, and 5-year durations.
