The Indian economy is showing early signs of growth pickup in Q3 FY25 as rural consumption is showing recovery due to a good monsoon season, which exceeded the long-term average by 8 per cent, according to a report on Wednesday.
The BJP-led NDA government has regained momentum and their recent wins in state elections and bye-elections have set the stage for a renewed focus on development initiatives.
This could lead to increased capital expenditures, according to the report by Motilal Oswal Financial Services (MOSL).
“The earnings trajectory in Q3 FY25 is expected to be similar to Q2 FY25, primarily driven by the BFSI sector, along with capital goods, technology, healthcare, and real estate,” the report mentioned.
It expects an 8 per cent adjusted earnings growth for BFSI universe, which will be driven by insurance (+23 per cent), PSBs (+13 per cent), NBFC non-lending (+39 per cent), NBFC lending (+8 per cent), and private banks (+2 per cent).
Notably, earnings of the capital goods sector are projected to rise 26 per cent YoY during the quarter.
“With FY25 being an election year, order inflows were expected to be weak, but orders are anticipated to ramp up from Q4 FY25,” said the report.
The ordering activity has remained strong across thermal power, renewables, T&D, data centres, buildings and factories, while it has been weak in water and railways.
Additionally, markets need to watch out for both the Union Budget and the RBI monetary policy.
The Union Budget will be a critical event, providing clues about a potential revival in government capital expenditure and measures to boost consumption. Similarly, the RBI monetary policy in February will also be crucial in determining interest rate trends, the report mentioned.
Overall, “the medium-term opportunities for India remain intact,” it added.