HSBC Mutual Fund India Chief Executive Officer Kailash Kulkarni on Wednesday, 5 August said India is well-positioned to continue outpacing most major global economies, citing strong domestic consumption, rising foreign direct investment, and an expanding network of Free Trade Agreements (FTAs) as the primary growth drivers. Speaking in an interview, Kulkarni expressed confidence that India's structural tailwinds would sustain its economic momentum despite persistent global headwinds.

Key Growth Drivers Identified

Kulkarni attributed India's resilient economic performance to three foundational pillars: the government's sustained focus on strengthening corporate and sovereign balance sheets, accelerating FDI inflows, and the country's growing roster of bilateral and multilateral trade agreements. He argued that these factors, in combination, create a self-reinforcing cycle of investment and output growth.

'India's economy will continue to perform better than many other countries despite global uncertainties. Strong domestic consumption and continued growth in exports will support the economy,' Kulkarni said.

FTAs to Benefit Multiple Sectors

On the trade front, Kulkarni noted that India's recently concluded FTAs are unusually broad in sectoral coverage — a departure from past agreements that often concentrated gains in a narrow cluster of industries. 'Industries such as jute, textiles, automobiles, defence, information technology and several others stand to gain from these agreements,' he said. He added that the trade pacts would help sustain GDP growth of over 7 per cent. This comes amid India's ongoing negotiations with the European Union, the United Kingdom, and several other economies, signalling a more aggressive trade-diplomacy posture than in previous years.

Mid- and Small-Cap Outlook

Asked whether mid- and small-cap stocks would continue to outperform their large-cap counterparts, Kulkarni offered a nuanced view. He noted that while history supports the long-term outperformance of smaller market segments, elevated volatility environments tend to favour large-caps in the near term. 'Whenever markets witness heightened volatility, mid- and small-cap stocks tend to underperform. However, over the long-term period, they have historically generated better returns than largecap stocks,' he said. The observation is particularly relevant given recent global risk-off sentiment triggered by US macro data and geopolitical tensions.

SIP Flows Remain Resilient

Kulkarni also highlighted a structural shift in Indian investor behaviour. He said sustained awareness campaigns over recent years have encouraged a more disciplined, long-term investment approach, with Systematic Investment Plans (SIPs) continuing to attract growing inflows even during periods of market stress. The trend suggests retail investors are increasingly treating SIPs as a volatility-management tool rather than exiting during downturns — a behavioural evolution that bodes well for the mutual fund industry's asset base stability.

What to Watch

With global central banks navigating a delicate balance between inflation control and growth support, India's relative insulation — anchored in domestic demand — gives it a structural edge. Whether that edge translates into sustained above-7% growth will depend on the pace of FTA implementation, the quality of FDI inflows, and the government's ability to maintain fiscal discipline while funding infrastructure. The next quarterly GDP print and FII flow data will be closely watched by markets.