Is the Indian Equity Market Ready for a Growth Surge Amid Festive Demand and GST Cuts?

Synopsis
Key Takeaways
- Indian equity markets are set for a robust festive quarter.
- Rate cuts and GST reforms are driving consumer demand.
- Key sectors include financials, infrastructure, and power.
- Festive season consumption accounts for a significant portion of annual sales.
- MFIs are likely to benefit from increased rural income.
New Delhi, Oct 15 (NationPress) The Indian equity markets are set to experience a robust festive quarter, propelled by interest rate reductions, GST 2.0 reforms, and enhanced domestic liquidity, according to a report released on Wednesday.
The latter half of FY26 promises greater market strength, primarily driven by the financial, consumption, infrastructure, and power sectors. This growth is expected as policy reforms and festive enthusiasm create new opportunities, as highlighted in the report by investment platform Smallcase.
Revitalized Foreign Institutional Investor (FII) inflows, credit growth, and strong earnings momentum are anticipated to fuel the next phase of the market rally, the report noted.
Experts indicated that sectors such as microfinance, consumer discretionary, and public sector banks could be significant beneficiaries of this trend.
"With GST cuts enhancing affordability and rate cuts facilitating easier credit access, urban and rural demand is converging thanks to increased electrification, aspirational spending, and improved credit penetration. Additionally, the recent rate cuts will lower EMIs, making high-value consumer goods more accessible," stated Robin Arya, Investment Manager at Smallcase and Founder of GoalFi.
Microfinance Institutions (MFIs) are expected to benefit as rural incomes, boosted by the monsoon, and the festive season in H2 FY26, drive a rise in new disbursements, especially for two-wheeler and consumer durable loans, he added.
The festive season from October to December typically accounts for 35-40% of annual consumption in discretionary categories. Initial indicators point to strong momentum, with e-commerce sales projected to reach Rs 1.2 lakh crore (an increase of 27% YoY), UPI transactions surpassing 20 billion in August 2025, and MSME festive credit demand expected to soar by 35-40% to Rs 3.45 lakh crore, according to Smallcase.
The Reserve Bank of India (RBI) has revised FY26 growth to 6.8%, highlighting strong rural demand supported by favorable monsoons, vigorous agricultural activity, and slowly reviving urban demand. Furthermore, the government has announced a Rs 11.21 lakh crore capital expenditure allocation for FY26, fostering infrastructure-led growth, particularly benefiting sectors such as railways, roads, and urban development.