New Delhi, March 7: India’s long-term outlook remains strong and the investment cycle is projected to be on a medium-term uptrend supported by government investment in infrastructure and manufacturing, pickup in private investments, and a recovery in the real estate cycle, a new HSBC report said on Friday.
The HSBC Mutual Fund’s ‘Market Outlook Report 2025’ expects higher private investments in renewable energy and related supply chains, localisation of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth.
“Post the recent correction, Nifty valuations are now in-line with its 5/10-year average. We remain constructive on Indian equities supported by the more robust medium-term growth outlook,” the report mentioned. Nifty now trades on 18.1 times, one-year forward price-to-earnings (PE) ratio.
This is now a 7 per cent discount to its 5-year average and in line with its 10-year average. Valuations in Midcap and Smallcap space have also moderated following the sharp correction over January and February.
According to the report, the global macro environment remains challenging with heightened geopolitical and economic uncertainties. For India, GDP growth has improved to 6.2 per cent (YoY) in Q3 FY25.
“We believe the government has tried to partly address the slowdown in private consumption through the income tax rate cuts in the Union Budget. However, a pickup in private capex will be critical as government capex is moderating,” the report noted.
Central government capex spending is now expected to grow only at 7 per cent (YoY) in FY25 and at 10 per cent (YoY) in FY26. The RBI is also now trying to ease policy rates. “We believe longer-term outlook remains strong,” the report said.
On debt outlook, the report mentioned that after a rapid slide seen in January, the currency levels fared better in February owing to the RBI’s policy steps — the FX buy/sell USD swap windows.
“The real economy, as of now, has evinced resilience to global developments. Basis the growth-inflation numbers, the MPC’s last policy action as well as the MPC minutes, we believe the RBI-MPC would deliver another 25 bps cut at its April policy while continuing to stay nimble and flexible on its liquidity strategy,” the report projected.
For a third rate cut, inflation trajectory, monsoon outlook and global developments will possibly be key inputs going into the June policy meeting.
IANS