Synopsis
HSBC's report highlights a robust long-term outlook for India, driven by government investments, private sector activity, and a recovering real estate market. The report anticipates a potential RBI rate cut in April amid challenging global conditions and improving GDP growth.Key Takeaways
- Long-term outlook for India is strong
- Investment cycle expected to trend upwards
- Government investments in infrastructure
- Private investments in renewable energy
- Possible RBI rate cut in April
New Delhi, March 7 (NationPress) India's long-term outlook continues to be strong, with the investment cycle anticipated to trend upwards in the medium term, fueled by government investments in infrastructure and manufacturing, an increase in private investments, and a revival in the real estate sector, as noted in a recent report by HSBC.
The HSBC Mutual Fund’s ‘Market Outlook Report 2025’ forecasts a rise in private investments within renewable energy and associated supply chains, alongside the localization of advanced technology components, positioning India as a significant player in global supply chains to facilitate accelerated growth.
“Following the recent market correction, Nifty valuations have adjusted to align with their 5/10-year averages. We maintain a positive stance on Indian equities, bolstered by a more robust medium-term growth outlook,” the report stated.
Nifty is currently valued at 18.1 times its one-year forward price-to-earnings (PE) ratio, reflecting a 7% discount to its 5-year average while remaining consistent with its 10-year average.
Valuations in the Midcap and Smallcap sectors have also seen moderation after the substantial corrections experienced in January and February.
The report highlights that the global macroeconomic landscape remains challenging due to intensified geopolitical and economic uncertainties.
For India, GDP growth has risen to 6.2% (YoY) in Q3 FY25.
“We believe the government has made attempts to mitigate the slowdown in private consumption through income tax rate cuts in the Union Budget. Nevertheless, a resurgence in private capital expenditure is crucial as government capital expenditure is slowing down,” the report indicated.
Central government capital expenditure is projected to grow by only 7% (YoY) in FY25 and 10% (YoY) in FY26. The RBI is also taking steps to ease policy rates.
“We are confident that the long-term outlook remains strong,” the report concluded.
Regarding the debt outlook, the report noted that following a sharp decline in January, currency levels stabilized in February due to the RBI’s policy measures, including the FX buy/sell USD swap windows.
“The real economy has displayed resilience against global shifts. Based on growth-inflation metrics, the MPC’s previous policy actions, and the minutes from the MPC, we predict that the RBI-MPC will implement another 25 bps rate cut in its April policy meeting, while maintaining flexibility in its liquidity strategy,” the report anticipated.
Factors such as the inflation trajectory, monsoon forecasts, and global developments will likely play significant roles in the June policy meeting.
