HSBC Mutual Fund's Report Says India’s Growth Cycle May Be Bottoming Out

India’s domestic growth cycle may be approaching a turning point, supported by multiple positive macroeconomic factors such as easing interest rates, a decline in crude oil prices, and stable liquidity conditions, according to a report by HSBC Mutual Fund. The report suggests that these elements, along with a normal monsoon, may help the Indian economy gain momentum in the near term.

Growth Outlook and Key Drivers

The report noted that several supportive indicators point to an improvement in economic activity. “The growth cycle in India may be bottoming out. Interest rate and liquidity cycles, a decline in crude prices, and a normal monsoon are all supportive of a pickup in growth going forward,” it stated.

While external conditions remain uncertain, HSBC Mutual Fund believes that domestic fundamentals will drive India’s growth trajectory. The report highlights government investments in infrastructure and manufacturing, a recovery in real estate, and a pickup in private capex as key contributors to the economic uptrend.

Investment and Market Sentiment

According to HSBC Mutual Fund, India’s investment cycle remains on a medium-term uptrend, even as global trade-related uncertainty poses a short-term headwind for private capital expenditure.

The report observed that Nifty valuations are modestly above their 10-year average, but remains positive on Indian equities due to the economy’s robust growth outlook and improving business confidence.

Potential Headwinds

Despite the positive outlook, the report cautioned that several global and domestic risks could affect growth momentum. Weak global demand is expected to remain a drag on exports in the near future.

It also flagged policy uncertainty, including the potential impact of tariffs, trade restrictions, and geopolitical conflicts, as factors likely to weigh on private investment sentiment.

Medium-Term Growth Prospects

HSBC Mutual Fund highlighted that capacity utilisation levels, based on the Reserve Bank of India’s survey data, are currently at a reasonably high level. This suggests there is scope for a pickup in private capital expenditure as businesses expand capacity to meet rising demand.

Furthermore, the continued expansion of the PLI scheme and higher investments in renewable energy and its related supply chains are expected to underpin India’s economic momentum over the medium term.

Read More: India's Economy Projected to Grow at 6.7% Annually.

Conclusion

The HSBC Mutual Fund report concludes that while near-term challenges persist due to weak global demand and policy uncertainty, India’s growth story remains structurally strong. Supported by favourable domestic conditions, rising private investments, and policy-driven incentives, the country’s growth cycle appears to be stabilising and could accelerate in the coming months.

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