India’s capital expenditure between FY25 and FY30 is projected to shift focus from public transport infrastructure to a more diversified investment in energy infrastructure. This includes advancements in electricity generation and efforts to integrate power grids for more efficient transmission and distribution, as outlined in a BNP Paribas report.
Despite global trade challenges and fluctuating monetary policies, India’s economy is expected to stay resilient. Major economies like India, China, and the United States are less dependent on external trade, which helps shield them from the risks associated with tariff disputes.
Due to its inward-oriented economy, India is likely to face less trade volatility compared to smaller, trade-dependent nations.
The yield on US 10-year bonds has risen from 3.7% in September 2024 to 4.5% recently, while India’s 10-year bond yield has remained stable, hovering between 6.7% and 6.9%. This has led to a narrowing of the yield gap, contributing to a 3% depreciation of the Indian Rupee (INR) since September 2024.
Economists at BNP Paribas predict that US inflation will continue to face upward pressure, limiting the likelihood of any rate cuts in 2025. On the other hand, the Reserve Bank of India (RBI) may consider cutting rates to bolster economic growth, which could further narrow the yield gap and put additional downward pressure on the INR.
In India, both consumer staples and industrial sectors are trading at premiums compared to their historical valuation averages and relative to other emerging markets. Industrial stocks have benefitted from India’s strong manufacturing momentum, while consumer staples may undergo a phase of price corrections.
Capital expenditure, particularly in the energy sector, is expected to maintain strong momentum, with infrastructure investments in energy continuing to be a significant focus.
The healthcare sector is projected to experience steady revenue growth, with an anticipated aggregate growth rate of 10% and an EBITDA margin of 27% in FY26. However, pharmaceutical companies may see some revenue decline as certain one-time opportunities fade by the end of 2025. The approval of new products and their integration will be key factors to watch.
While the possibility of US tariffs on Indian healthcare products still exists, it is unlikely due to the US’s heavy reliance on Indian pharmaceutical supplies.
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