The key risk investors have perceived about India has been 2: 1) The proposed tariff imposition of 50% from US due to India’s nexus with Russia. 2) The quarterly results of Q1F26 depicted a topline growth of 6-7% for the broader index, one of the slowest topline growths in the last 12 quarters.
This suggests a possible continued slowdown in B2C consumption as depicted by the country’s loan book growth of 10-11% down from a peak of 18-20%. The Indian Government has announced radical changes in the GST after 8 years which should lead to lower prices for mass goods for consumers & propel consumption.
The Indian markets have had a time correction over a year with the Large cap being virtually flat & Mid & Small cap being 4-5% lower over a year. We believe there is a case for going long on India due to the resilient Indian economy & themes we like on a bottom-up basis include Finsumption (Financial + Consumption), Capex & Make in India.
ETMarkets.comThe India-Russia nexus helps Forex reserves & keeping India’s import bill low
India now sources nearly 38% of its crude oil imports from Russia—up from just 2% before the Ukraine conflict. This shift offers two major economic benefits:
Cost Efficiency: Russian Urals crude trades at a 10–15% discount to Brent, despite comparable quality. Indian refiners save approximately $7–10 per barrel, translating to annual savings of $4.5–7 billion. These savings bolster refining margins and offset losses in LPG distribution.Forex Preservation: Russia settles a significant portion of its oil trade with India in INR or other non-dollar currencies. This could amount to $40–45 billion annually, helping conserve India’s foreign exchange reserves.
Given these advantages, India is likely to maintain its energy partnership with Russia despite external pressures.
F1Q26 Results – Tepid topline & bottom-line
Our analysis suggests results of the broader index in Q1F26 has led to a 6% top line growth a stronger EBITDA growth of 13% due to lower raw material costs & a PAT growth of 7%.
The topline growth was one of the slowest in the last 12 quarters largely due to a slowdown in B2C consumption depicted by sluggish loan book growth down from peak of 20% to 10-12% currently, especially in retail consumption.
The growth for MIDCAP at EBIDTA & PAT level being 18% & 16% was higher. We have seen strong off shoots of growth in Telecom, Cement, realty & Chemical sector.
In a bid to revive consumption, the government had already cut taxes in the recent budget of 3-5% for people earning less than Rs. 25 Lakh. The PM has also announced restructuring the GST from 4 slabs to a simpler 2 slab structure along with a higher tax for Sin goods like SUVs, Cigarettes, Aerated drinks, Tobacco etc.
Details of the same are expected shortly but our estimates suggest Rs. 1.5-2 trn reduction in GST or 0.4-0.5% of GDP. This could revive the much needed thrust in retail consumption.
Interestingly the government is collecting Compensation Cess which is budgeted at around Rs. ~1.7 Trn which could negate this loss in GST collection. Hence, this revenue reduction of GST for the government may not increase the fiscal deficit.
Indian Opportunities Ahead
Investors may consider focusing on sectors and themes that offer structural growth and are well-positioned to benefit from current trends and at reasonable valuations:
Finsumption: The housing finance sector is likely to gain from increased budgetary allocations and a falling interest rate environment.Indian Capital market players likely stand to gain from increased liquidity and credit growth.
The Consumption story of India has slowed down and here we would bet on bottom-up ideas.
Capex-linked sectors: Capital goods (Infrastructure – Cement, Ports, Pipes, Tubes, Power) are likely to benefit from government spending which has increased 7-fold in 11 years.Home Bias manufacturing and Make in India themes: Pharmaceuticals and specialty chemicals continue to offer long-term growth potential driven by domestic demand and export opportunities. The India and UK FTA treatment on textiles also presents us opportunities to focus on companies which may increase their exports due to this opportunity
(The author is CIO and Head – Equity Advisory, ASK Private Wealth)
Disclaimer: The information and opinion expressed herein above do not constitute an investment advice to buy, sell, hold any securities, kindly consult appropriate SEBI registered intermediary before making investment related decisions. The opinion expressed above are personal views of the author. The views of the author may also differ from the views expressed by any other author of ASK Asset and Wealth Management.
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