HDFC Securities projects India's real GDP growth at 6.5% for FY26-27, with a focus on infrastructure capex. The report also anticipates inflation easing to 4.5% and a fiscal deficit target of 4.3%, despite ongoing geopolitical tensions.
In the backdrop of geopolitical tensions and a recent market correction, India's real GDP growth is projected to be approximately 6.5 per cent for FY26-FY27, with nominal GDP expected to expand in the range of 10-11 per cent, according to a report released by HDFC Securities on Monday.
Macroeconomic Outlook
"The Big Review 2026" presents a detailed outlook on India's economy and capital markets for FY27. It underscores the government's sustained emphasis on infrastructure development, projecting that capital expenditure could account for nearly 32 per cent of total spending in FY27. On the macroeconomic front, inflation is anticipated to ease to around 4.5 per cent, while the fiscal deficit target is estimated at 4.3 per cent, reflecting continued fiscal consolidation efforts.
External Sector Headwinds
According to the report, the Indian rupee continues to face pressure due to subdued foreign direct investment inflows and persistent trade deficits. Foreign portfolio investors have withdrawn approximately USD 18 billion in FY26, signalling ongoing external headwinds.
Corporate Earnings and Sectoral Trends
On earnings, the report estimates around 10 per cent growth for the broader market, although sectoral trends may remain uneven. The banking, consumer discretionary, metals, and telecom sectors are expected to see gradual improvement, while the energy sector may witness contraction.
Investment Strategy and Valuations
Despite recent corrections, valuations in mid-cap and small-cap segments remain elevated. The report advocates a "Growth at a Reasonable Price" (GARP) investment strategy, favouring sectors such as industrials, infrastructure, consumer discretionary, and real estate, while maintaining an underweight stance on cement, chemicals, and oil & gas.
Retail and IPO Market Activity
Retail investor participation continues to remain robust, with demat accounts rising to over 222 million and systematic investment plan inflows exceeding Rs 30,000 crore annually. IPO activity also remained strong during FY26, with over 150 issues raising more than Rs 2 lakh crore.
Market Outlook and Recovery Potential
Highlighting recovery potential, the report notes that markets have historically rebounded strongly following geopolitical shocks, delivering average gains of 16-17 per cent within a month and up to 38 per cent over six months.
The report concludes that Indian markets may be nearing the bottom of the current correction cycle, with improving valuations offering selective opportunities for long-term investors, even as foreign investor sentiment remains cautious. (ANI)
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