● Real GDP growth at four-quarter high in 4QFY25:Real GDP growth came in higher than expected at 7.4% in 4QFY25 (highest in four quarters) vs. 7.3%/6.4% in 4QFY24. The acceleration in GDP growth was led by robust growth in investments and a higher contribution of net exports to real GDP growth. Full year private consumption picked up in terms of growth while government consumption dragged down real GDP growth.

● US tariffs would lead to uncertanities: The decision of the US government to suspend reciprocal tariffs for most countries (except for China) for 90 days have provided some relief to the Indian market in the short term. However, we do not see any change in the US’s goals, leading to continued large uncertainties for (1) countries (level of tariffs), (2) exporters (new capex and orders) and (3) companies (earnings). Thus we expect market to remain volatile amid uncertanities in near term.

● Budget: The FY26 budget pivoted to consumption from capex to provide a fillip to faltering domestic demand and boost economic growth without compromising on fiscal consolidation commitment. It put more money in the hands of people by realigning tax slabs (Rs. 1tn higher disposable income), increasing allocation for rural schemes and enhancing credit limit for KCC farmers from Rs. 300K to Rs. 500K (providing access to Rs. 3.3tn credit at 4% interest rate). All these government intiatives is expected to fuel consumption and same should start reflecting from 2HFY25 onwards in our view.

● Robust GST Collection: May 2025 GST collection remains robust at Rs2tn, strong 16.4% growth on YoY highlights strong economic activity. The growth was primarly driven by GST on imports while GST on domestic transactions grew 13% YoY.

● Outlook: Weak demand and slowdown in central government capex continue to weigh on corporate earnings, rising disposable incomes—driven by direct benefit transfers (DBT) and personal income tax cuts—should support a recovery in consumption. A coordinated increase in both central and state capex is essential for sustained economic growth. We remain constructive on Indian equities over the long term, driven by structural reforms, resilient domestic consumption, and improving macroeconomic fundamentals.increase in both central and state capex is essential for sustained economic growth. We remain constructive on Indian equities over the long term, driven by structural reforms, resilient domestic consumption, and improving macroeconomic fundamentals.