Benign Inflation and Improving Earnings Set the Stage for India’s Next Growth Phase: PL Wealth Management
- Domestic inflows cross ₹6.8 trillion YTD, anchoring markets even as global volatility persists
- Gold up over 60% and silver surges 100% in 2025 as precious metals strengthen portfolio appeal
Mumbai, 19th December 2025: PL Wealth, the wealth management arm of PL Capital (Prabhudas Lilladher), in its latest report titled Market Outlook – December 2025, cited that India enters the final month of the year from a position of relative macroeconomic and market strength, clearly distinguishing itself as a structural outperformer amid an increasingly uncertain global environment, with record-low inflation, a supportive monetary policy stance, resilient domestic demand, and improving visibility on corporate earnings collectively reinforcing confidence in the country’s medium- to long-term growth trajectory.
The Reserve Bank of India’s latest monetary policy decision has further strengthened this constructive outlook. The Monetary Policy Committee unanimously reduced the policy repo rate by 25 basis points to 5.25%, while maintaining a dovish stance and deploying active liquidity management measures. In addition, the RBI sharply lowered its CPI inflation projections and upgraded GDP growth estimates, signalling comfort with evolving inflation dynamics and confidence in the sustainability of domestic demand. Headline CPI inflation fell to a multi-year low in October 2025, driven by an unexpected correction in food prices, while core inflation remained well contained even after factoring in pressures from precious metals.
Against this supportive macro backdrop, India’s GDP growth forecast for FY26 has been revised upward to 7.3%, underpinned by robust infrastructure spending, resilient consumption and key policy measures such as GST rationalisation and income-tax cuts. High-frequency indicators continue to reflect strong momentum, with the composite PMI holding near expansionary highs and the services PMI strengthening further in November. Festive-season demand, healthier corporate and banking balance sheets, and early signs of a revival in private capital expenditure have all contributed to improved growth visibility.
Indian equity markets have demonstrated notable resilience amid global volatility, supported by strong domestic fundamentals and an improving earnings environment. The September quarter earnings season for FY26 delivered broad-based strength, with several sectors—including hospitals, capital goods, cement, electronics manufacturing services, ports, NBFCs and telecom—reporting double-digit growth in EBITDA and profits. Importantly, this period marked the first upgrade to NIFTY earnings estimates since August 2024, indicating the potential onset of a new earnings upgrade cycle.
NIFTY EPS estimates have been revised upward for FY26 through FY28, translating into a healthy earnings CAGR of nearly 14% over the period. Based on long-term valuation averages, PL India now estimates a 12-month NIFTY target of 29,094, reflecting confidence in earnings durability rather than valuation re-rating alone. Domestic institutional investors have continued to anchor markets, with record net inflows of over ₹6.8 trillion year-to-date, largely driven by steady SIP participation. While foreign portfolio outflows have persisted, their pace has moderated significantly compared to earlier in the year.
Commenting on the outlook, Inderbir Singh Jolly, CEO, PL Wealth Management, said, “India’s current macro configuration is among the most constructive we have seen in over a decade. With inflation at multi-year lows, monetary policy firmly growth-supportive and domestic demand holding up strongly, the foundation for a durable earnings cycle is now in place. While global uncertainties will continue to create short-term volatility, India’s structural strengths—policy reform, financialisation of savings and improving corporate balance sheets—position it well for sustained long-term growth.”
From a strategy standpoint, PL India continues to adopt a balanced and quality-focused investment approach. In the near term, large-cap stocks remain preferred due to their earnings stability and strong balance sheets, while selective exposure to high-quality mid-cap names is being added as visibility improves. Over the next 6 to 24 months, the earnings cycle is expected to broaden across consumption, financials, capex-linked sectors and select industrials, supported by benign inflation, lower interest rates and sustained domestic liquidity.
The fixed income environment has also turned decisively favourable. A combination of rate cuts, multi-year low inflation and proactive RBI liquidity operations has enhanced the risk-reward profile across bond markets. Government bond yields remain steep, with the five-year G-Sec offering a term premium of nearly 100 basis points over the policy rate. PL India continues to favour the five- to eight-year segment of the yield curve, which benefits from open market operations and attractive carry. High-quality AAA-rated corporate bonds in the two- to four-year maturity segment also offer compelling value, with potential for further spread compression as liquidity conditions ease.
Despite the supportive domestic environment, certain external challenges persist. India’s merchandise trade deficit widened sharply in October, driven by a surge in gold and silver imports, even as exports softened amid weaker global demand. The rupee has remained under pressure, trading near recent lows against the US dollar due to external headwinds and elevated bullion imports. However, strong services exports, stable remittance inflows and manageable current account deficit projections are expected to prevent any material deterioration in external balances.
Globally, economic growth is expected to remain subdued over 2025–26, with advanced economies experiencing a soft patch and trade-related uncertainties continuing to weigh on sentiment. Nonetheless, multilateral agencies continue to position India as one of the fastest-growing major economies, highlighting its relative insulation from global slowdowns due to a large domestic demand base and ongoing structural reforms.
Commodities—particularly precious metals—have emerged as a key structural theme within multi-asset portfolios. Gold has been among the strongest-performing assets of 2025, rising over 60% year-to-date, supported by record global demand, strong ETF inflows and sustained central bank buying. India has recorded its highest-ever gold ETF inflows this year, underscoring gold’s growing role as a strategic asset for both retail and institutional investors. The outlook for gold in 2026 remains moderately to strongly positive amid geopolitical uncertainty, currency volatility and expectations of lower real yields.
Silver has significantly outperformed gold, gaining over 100% year-to-date and crossing the US$60 per ounce mark. Its performance has been driven by a powerful industrial demand cycle linked to solar energy, electric vehicles, semiconductors and power electronics, alongside persistent supply deficits. While silver remains more volatile than gold, its long-term outlook is supported by strong structural demand from the global energy and technology transition.
Overall, PL Wealth Management reiterates confidence in India’s long-term growth narrative, even as near-term risks from global volatility, trade dynamics and currency pressures persist. With inflation benign, policy support firmly in place and earnings visibility improving, PL India continues to advocate a disciplined and diversified investment approach—focusing on quality equities, stable carry in fixed income and selective exposure to structural growth themes such as domestic cyclicals and precious metals—as India closes 2025 on a strong macro and market footing.
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