Strategic Allocation Outlook
Neutral-to-positive stance on equities; carry and gold remain attractive
| Asset Class | Our View | Commentary |
| Equity | Neutral – Bias Positive | Bottom-up opportunities still exist. Follow 60:20:20 when it comes to large, mid and smallcap allocation. It’s a buy-on-dip market. |
| Debt | Positive | A barbell approach is prudent — blending select long-duration exposure with 2–3-year high-quality accrual strategies. |
| Gold & Silver | Positive | Suggested to buy on the dip. Maintain it as a strategic allocation. |
| Real Estate | Negative | Opting for investments through REITs and realty stocks might be the favorable choice. |
| International Equities | Netural | Maintain it as a strategic allocation; avoid going overweight. Tactically positive on China. |
| Investment Ideas For FY26 | 1.China
2.Capital Markets |
Suggested to be part of satellite portfolio. Allocation: 5-10%, Staggered deployment recommended. |
Macro Tracker: Current Economic Positioning
Macro Executive Summary
Current Momentum
- GDP growth at 7.8% (5-quarter high), led by consumption (+7.1%) and investment (+7.3%).
- Rural consumer sentiment at a 2-year high, supported by strong monsoon and farm optimism.
- PMI readings above 60, signaling resilient private sector activity despite global headwinds.
- GST inflows steady at ₹1.9 tn, though growth eased to 6.5% YoY.
- Project completions surged (₹546 bn in Aug), with a strong order pipeline in infra and power.
- Forex reserves stable at USD 691 bn, but INR hit a record low of 88.2/USD.
- FIIs pulled out ₹35k cr, offset by record DII inflows of ₹95k cr.
Key Risks to Outlook
- External shocks: US tariffs, strong dollar, and global trade uncertainty weighing on exports.
- Currency pressure: INR weakness raises imported inflation risks.
- Fiscal strain: GST rate cuts and revenue shortfalls could test deficit targets despite strong capex.
- Trade deficit: Sustained above USD 26 bn, driven by high POL imports and volatile gold flows.
Way Forward
- Near-term support from festive consumption, GST cuts, and resilient rural demand.
- Medium-term moderation expected in GDP growth (towards 6.2–6.3% by FY27-28).
- Policy cushion via RBI’s ample reserves and government capex push remains crucial.
- Monitoring trade balance, currency volatility, and fiscal math will be key watchpoints.
GDP Growth At 5 Quarter High
GST Cuts + Strong Q1 = Upward Growth Revisions
| Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | |
| GDP | 8.4 | 6.5 | 5.6 | 6.4 | 7.4 | 7.8 |
| PFCE | 6.2 | 7.7 | 5.9 | 8.2 | 6.0 | 7.1 |
| GFCE | 6.6 | -0.5 | 3.8 | 9.3 | -1.8 | 7.5 |
| GCF | 9.1 | 6.4 | 6.1 | 4.9 | 7.8 | 7.3 |
| GFCF | 6.1 | 6.7 | 5.8 | 5.2 | 9.4 | 7.8 |
Update
India’s growth momentum received a boost with Q1FY26 GDP printing at 7.8%, well above consensus, led by resilient consumption (+7.1%) and investment activity (+7.3%). This coincided with the GST Council’s decision to cut the 12% slab to 5% on most FMCG and consumer durables effective September 22, 2025, aimed at lowering prices and reviving demand.
Drivers
The GST cut is expected to add 20–60 bps to GDP growth, translating into a ₹0.7–1 trillion consumption boost, partly offsetting the drag from recent US tariffs. Forecast agencies have revised India’s growth outlook upwards—ICRA to 6.5%, Fitch to 6.9%, and IDFC First Bank to 6.6% for FY26—on the back of stronger domestic demand, rising real incomes, and supportive financial conditions.
Way Forward
Festive consumption and policy support should sustain near-term growth momentum, but external pressures remain. A widening trade deficit (8-quarter high at 5.1% of GDP) and expectations of medium-term moderation with GDP growth tapering towards 6.2–6.3% by FY27–28 will be key watchpoints.
