In a recent report by PL Capital Group – Prabhudas Lilladher, it was highlighted that the Indian economy is experiencing steady growth, driven by a peak in food inflation and the government’s efforts to accelerate capital expenditure (capex) spending. The upcoming Union Budget and the potential return of Donald Trump to the political scene are seen as key factors influencing market returns.
Rural demand is showing a sustained recovery, with the festival and wedding season boosting demand for travel, jewelry, watches, quick service restaurants (QSR), footwear, apparel, and durables. Amnish Aggarwal, Director of Institutional Research, noted an uptick in ordering momentum in sectors such as Railways, Defense, Power, and Data Centers, which is expected to accelerate growth in FY26 and beyond.
The report anticipates a growth-oriented budget aimed at stimulating the economy and incentivizing middle-class spending. Key themes for long-term gains include India’s capex story, discretionary consumption, and financialization.
Retail is undergoing a significant transformation, with quick commerce changing the dynamics of grocery and other discretionary segments. The report warns that the extension of quick commerce into discretionary segments and food services could create near-term disruptions and impact profitability.
The cement industry is expected to see better growth and profitability due to a revival in construction activity and anticipated price hikes. The fortunes of the steel industry will depend on import duties and global price trends.
Capital goods and defense sectors are projected to experience improved ordering momentum and execution in the coming quarters. The budget will be crucial for the sustainability of capex, given the likely miss in target spending for FY25. However, sectors such as Defense, Power, Data Centers, Railways, and energy transition remain potent themes.
As 2025 progresses, agriculture is expected to benefit from a good Rabi crop and normal weather patterns, which should help cool down inflation to 4.3-4.7 percent in FY26. Higher crop output, increased construction and factory activity, and moderating inflation are anticipated to bolster demand towards the end of Q4 FY25.
