Private capex boosts India’s medium‑term growth, 25 bps repo cut likely: Report

India’s medium-term economic prospects remain positive, supported by rising private capital expenditure and robust consumer demand, which fueled a significant rebound in equity markets during October, according to a recent analysis.

The report from HSBC Mutual Fund highlighted that Nifty valuations currently sit slightly above their historical 10-year average, maintaining an optimistic stance toward Indian equities moving forward.

In fixed-income markets, the fund house identified attractive potential in the 2-4 year corporate bond segment. It further suggested that persistent inflation concerns and economic uncertainties could lead to a 25 basis point rate reduction during the December 5 policy review.

Regarding equities, analysts observed early signs of economic stabilization. Declining interest rates, improving liquidity conditions, lower crude oil prices, and normal monsoon patterns are expected to bolster growth momentum.

Recent reductions in GST rates and earlier income tax cuts are anticipated to stimulate consumer spending while encouraging private investment, particularly amidst ongoing global economic challenges.

The analysis emphasized that sustained government infrastructure spending, manufacturing sector initiatives, and revival in real estate activity will likely maintain investment growth over the medium term.

Indian equity markets demonstrated strong recovery in October, with both Sensex and Nifty registering over 4% gains, driven by foreign institutional inflows and improved domestic investor sentiment.

Sector-wise performance showed real estate leading the gains, while oil & gas, metals, banking, and IT sectors outperformed the broader Nifty index. Healthcare, power, FMCG, and automotive sectors trailed behind during the period.

Market participants are closely monitoring upcoming macroeconomic indicators including November’s CPI inflation data, trade deficit figures, GDP estimates, and GST collections for insights into future monetary policy direction.

The report additionally noted persistent liquidity constraints despite RBI’s foreign exchange market operations, with market expectations leaning towards potential liquidity injections through open market purchase programs.

(With inputs from IANS)