Despite easing geopolitical tensions and lower oil prices, Indian markets are subdued due to weak domestic growth drivers, prompting calls for a post-Covid-style investment push to revitalise manufacturing and industry.
Indian markets have not responded with a broad rally despite easing geopolitical pressure and lower oil prices because the deeper problem is not external shocks but weaker domestic growth engines, according to Taher Badshah, president and chief investment officer at Invesco Mutual Fund. In an interview with Business Standard, Badshah said India still relies too heavily on services, while investment in manufacturing and industry remains short of what is needed to create stronger spillover effects across jobs, demand and allied sectors.
He argued that the clearest example of what can lift markets is the post-Covid investment cycle, when public capital spending helped support a wider recovery even as private investment stayed subdued. Badshah said India needs a similar push again, with manufacturing capacity, industrial expansion and production-linked incentive schemes scaled up more aggressively. Recent growth forecasts underline both the economy’s resilience and the uncertainty around the next phase: the Economic Survey projected real GDP growth of 6.8% to 7.2% for FY27, while other forecasters have offered a wider range, from the IMF’s 6.4% to S&P Global’s later 7.1% estimate. Deloitte has also pointed to healthy recent growth, supported by consumption, public spending and investment.
Badshah said FY27 should still mark a recovery year for Indian equities. He pointed to a favourable base, policy support from the previous year, the carry-over effect of a strong monsoon and signs of better earnings momentum. He also said some of the factors that weighed on sentiment last year, including tariff uncertainty and the artificial intelligence-driven divergence in global markets, are beginning to fade.
On earnings, Badshah said the more useful question is not the headline index number but how many companies can sustain growth above 15%, or even 20%. In his view, roughly half of listed companies are now posting that level of expansion, creating enough scope for portfolios to deliver strong absolute returns even if the broader index looks less exciting. He added that Invesco is still finding opportunities in sectors such as industrials, healthcare, consumption, parts of banking and IT services, while remaining cautious on commodities, which he said are now harder to read because of currency moves, supply-chain disruptions and de-dollarisation.
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