Resilience Across Cycles and Structural Growth Trends

• India’s real GDP has grown 5.5% annually across the last four decades— declining only once in FY21 due to the Covid lockdowns.
• Real and nominal GDP are projected to growth at 6% and 11% CAGR, making India the world’s fastest growing, and third largest, economy by 2027.

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Demographics, Urbanization, and Consumption at an Inflection Point

• With a median age of 28, the country is home to the world’s largest working age population.
• Growing middle class population, supported by a steadily rising per capita GDP (USD 2800 as of May 2025) has led to consistent growth in discretionary spending
• Real and nominal Private Final Consumption Expenditures have been growing at CAGRs of 5% and 10% respectively, making up 55-60% of India’s GDP (FRED) and reflecting a resilient and expanding domestic consumer base.

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Digital Infrastructure and Productivity

• Adoption of digital infrastructure is rapidly enhancing productivity and transparency.
• Public sector initiatives such as UPI (Unified Payments Interface) and JAM (Jan Dhan – Aadhar – Mobile) have led to mass adoption of digital payments and accelerated financial inclusion.

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Strategic Positioning in a Changing World Order

• As global capital reallocates from China, India’s scale, cost base, and policy stability make it a preferred destination for investment.
• India’s manufacturing momentum is accelerating, supported by Production Linked Incentives schemes that incentivize scale, exports, and import substitution.
• Unlike many export-reliant emerging markets, India’s economy is largely fueled by domestic consumption—accounting for ~60% of GDP—making it less vulnerable to global trade disruptions and protectionist shocks.

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II. Public Markets Overview

India is home to the two of the world’s largest and most liquid stock exchanges— the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)—with over 5,000 listed companies and daily spot equity market turnover exceeding INR 1.1 trillion or USD 12.5 billion.

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National Stock Exchange

Launched in 1994, the NSE is India’s largest stock exchange by market capitalization and trading volumes. It is benchmarked by the NIFTY 50 index, which comprises the top 50 companies on the exchange, weighted by free float market cap.

Historical Performance (NIFTY 50 CAGR):

• 3Y: 17.2%
• 5Y: 19.7%
• 10Y: 11.6%

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Bombay Stock Exchange

Founded in 1875, the BSE is Asia’s oldest stock exchange and hosts the largest number of listed companies globally. It can be benchmarked by the BSE 500 index, which captures over 90% of total market capitalization and provides a comprehensive view of India’s listed equity market across large, mid, and small-cap segments.

Historical Performance (BSE 500 CAGR):

• 3Y: 19.9%
• 5Y: 22.08%
• 10Y: 12.82%

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Together, both exchanges provide a stable and growing investment environment with consistent P/E multiples, ranging between 20 and 25 over the last decade. This historical consistency in valuation—despite periods of volatility, such as the sharp spike and correction around 2020–2021—reflects investor confidence, earnings resilience, and disciplined market behavior.

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III. Sector Themes and Sample Companies

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Defense

India is currently the world’s second-largest importer of defense equipment, accounting for 8.3% of global imports between 2020 and 2024 (SIPRI). With ambitions to establish itself as a global defense manufacturing hub, India is increasingly focusing on strengthening its domestic defense capabilities. Indigenous companies will be critical in meeting the substantial demand for the expansion and modernization of defense systems—projected to reach INR 3 trillion by FY29, up from INR 1.3 trillion in FY24—while also scaling exports to INR 500 billion by FY29 from INR 217 billion in FY24 (IIFL).

Given the recent hostilities with Pakistan, India’s Defense Acquisition Council has authorized Emergency Procurement up to INR 400 bn (IIFL). Full utilization would imply a 20% increase in FY26 defense spending from the budget estimate, providing an immediate tailwind for the sector.

Key beneficiaries of the restocking, development, and modernization of indigenous defense equipment include:

1. Solar Industries India (SOLARINDS): Manufacturer of industrial explosives and propellants. Supplier for the BrahMos missiles used against Pakistan.
2. Data Patterns India (DATAPATTNS): Communications systems, avionics, satellites.
3. Paras Defense and Space Technologies (PARAS): Tier 2 defense contractor— optronics, heavy engineering, drones.

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Infrastructure

India’s infrastructure, over the last 5 years, has been in a phase of accelerated growth— supported by a sustained increase in capex from INR 3 trillion in 2019 to INR 11 trillion budgeted for 2025. Private participation is also expected to rise in tandem due to the increased capital market penetration of infrastructure AIFs and investment trusts (InvITs).

The railway sector alone has been allocated INR 2.6 trillion in the last union budget, with the Government aiming to launch 400 Vande Bharat trains and 1,000 mini-Vande Bharat trains in the next 3-4 years. In conjunction, the Government’s focus on doubling freight-loading volumes is expected to translate into strong demand for freight wagons and passenger rail systems.

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Alongside railways, affordable housing remains a key pillar of India’s infrastructure strategy, with targeted financing and land monetization initiatives aimed at boosting supply for lower and middle-income groups.

Sample stocks that will benefit from these macro trends include:

1. Titagarh Rail Systems (TITAGARH): Freight wagons, metro coaches, and Vande Bharat trainsets
2. NBCC India Ltd. (NBCC): Government-backed project management and EPC firm leading large-scale urban redevelopment and infrastructure projects.
3. Housing and Urban Development Corp. (HUDCO): Lender and consultant for affordable housing and urban infrastructure schemes across India.

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Financials

India’s financial sector has entered FY26 with a strong foundation, supported by record-low NPAs, robust capitalization, and rising credit demand. Gross NPAs for commercial banks declined to a 5-year low of 2.3% in March 2025, while credit growth is expected to accelerate from 11–11.5% in FY25 to 12–13% in FY26 (CRISIL).

Continued formalization of the economy, expansion in retail and MSME lending, and infrastructure-led credit demand are key drivers. Government-backed digital infrastructure initiatives—such as UPI, Jan Dhan, and Aadhar—are deepening financial inclusion and enhancing underwriting efficiency. Lenders with diversified portfolios and strong digital capabilities are well positioned to benefit from the next leg of the credit cycle.

Sample stocks include:

1. REC Ltd. (RECLTD): Public sector NBFC that backs electricity generation, transmission, and renewable energy projects nationwide.
2. PNB Housing Finance (PNBHOUSING): Leading housing finance firm offering affordable and commercial home loans.

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Consumer Discretionary

India’s consumer discretionary sector is benefiting from rising disposable incomes, rapid urbanization, and shifting consumption patterns. The sector has witnessed a sharp post-COVID rebound, led by categories like travel, apparel, QSR.

Domestically, the hospitality industry is projected to experience a CAGR of 10.5% over the next three years, driven mostly by domestic travelers that are increasingly willing to spend money on premium products. Further growth in this space will be spurred by the recently announced India-UK FTA deal, which will make Indian exports, specifically textiles and garments, more competitive than Bangladesh and Vietnam.

Sample stocks in this sector include:

1. Lemon Tree Hotels (LEMONTREE): Mid-market hotel chain catering to budget and business travelers across tier I and II cities.
2. Sapphire Foods (SAPPHIRE): Biggest franchisee of KFC, Pizza Hut, and Taco Bell in India.
3. Gokaldas Exports (GOKEX): Leading apparel exporter for global brands.

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IV. Fund Structure

Funds can now be set up as USD-denominated GIFT City based Category III Alternative Investment Fund (AIF), with investor capital originating from Singapore and routed through a Mauritius based feeder fund / SPV.

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GIFT City

GIFT City (Gujarat International Finance Tec-City) is India’s first International Financial Services Centre, designed to bring offshore financial activity onshore under a globally competitive regulatory and tax framework.

Key Benefits:

1. All operations can be conducted in USD.
2. 100% income tax exemption for a 10-year period.
3. Exemption from FEMA regulations— no barriers for repatriation of funds.

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The GIFT City structure allows entry into the fund through existing internationally accepted investment routes in USD such as Mauritius or Singapore, ensuring compliance with global norms and ease of access for offshore investors.