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Domestic Consumption Surge Drives India's Equity Rally, Samco MF CIO Says

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  Published in Stocks and Investing on Saturday, November 8th 2025 at 13:09 GMT by moneycontrol.com
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Domestic Consumption Surge, Not an India‑US Trade Deal, Is the Real Market Trigger, Says Samco MF CIO

The Indian equity markets have been on a positive swing for several weeks, buoyed by a strong upsurge in domestic consumption rather than external factors such as the India‑United States trade pact that has been in the headlines. The chief investment officer of Samco Mutual Fund, Ashish Chandra, cautions that the trade deal is unlikely to provide the significant market lift that some traders anticipate. Instead, he points to robust domestic demand as the key driver behind the recent rally in the NSE and BSE indices.

Market Snapshot

On the day of the article’s release, the NSE Nifty 50 recorded a 0.68 % gain, while the BSE Sensex rose 0.61 %. The top gainers included Reliance Industries, HDFC Bank, and Tata Consultancy Services, all of which posted gains in the range of 0.8–1.3 %. In contrast, several defensive names such as ITC and ITC limited their losses to 0.4 %. The overall sentiment remains upbeat, as the market seeks to capture a portion of the fiscal stimulus and the rising domestic demand wave.

The Domestic Consumption Narrative

India’s economic data released over the past month have consistently shown a spike in consumer spending. Retail sales have risen by 9.5 % YoY in the first quarter, while household consumption accounts for roughly 60 % of GDP. Chandra notes that the surge in consumer confidence is fueled by rising wages, an increase in the employment rate, and the easing of liquidity constraints following the RBI’s accommodative stance. “The data show a clear narrative of a consumption‑driven recovery,” he says. “We expect the market to keep looking at domestic demand metrics such as retail sales, wholesale index, and consumer price index.”

The article links to a separate Moneycontrol piece that explains how a growing middle class and increasing disposable income are turning Indian markets into a “home‑grown engine of growth.” It also cites an RBI survey that shows the consumer confidence index climbing to 68 from 55 in the previous quarter. In addition, the Government’s “Make in India” initiative and “Digital India” drive are expected to create ancillary consumption patterns that further support the upward trend.

The India‑US Trade Deal: A Secondary Driver

The India‑US trade negotiations have been a hot topic for weeks, with both sides hoping to settle tariff barriers and technology transfers. However, Samco MF’s CIO downplays its impact on the market. “Even though the trade deal can bring structural benefits, it will take time to materialize in the markets,” he says. “The immediate impact of such agreements is often muted, and the market tends to price in the longer‑term gains.”

He further explains that the trade deal is a “structural catalyst” rather than a short‑term shock. The markets may see a boost once the deal starts affecting specific sectors such as IT, pharmaceuticals, and defense, but the effect is expected to be gradual. Chandra emphasizes that traders should focus on domestic demand metrics rather than waiting for the trade pact to deliver tangible gains.

Implications for Investors

1. Favoring Growth Sectors:
Growth‑oriented stocks, especially those in consumer discretionary, IT, and financial services, are likely to benefit from the domestic consumption surge. Samco’s portfolio is re‑balanced to increase exposure to these sectors.

2. Defensive Stocks Remain Resilient:
Defensive names such as utilities and consumer staples have shown resilience during the rally. They provide stability amid the volatility caused by external macroeconomic factors.

3. Watch for Sector‑Specific Announcements:
The trade deal may bring sector‑specific benefits. For instance, the IT sector may gain from the removal of service taxes, while the pharmaceutical sector may benefit from the removal of certain tariffs on raw materials.

4. Economic Indicators Should Be Monitored:
Retail sales, consumer confidence, and the wholesale price index are the best indicators to track the momentum. The RBI’s policy decisions on interest rates and liquidity will also influence the market.

Additional Context from Follow‑Up Links

The article also cross‑links to a Moneycontrol analysis on the “India‑US Trade Deal: What Investors Should Know.” That piece outlines the key provisions of the deal, such as a reduction of customs duties on a range of high‑tech goods and increased access to the Indian market for US software companies. The analysis stresses that while the deal is strategically important, its short‑term financial impact may be limited, especially if implementation is phased over several years.

Another linked article examines “Domestic Consumption’s Role in India’s GDP Growth.” It provides a detailed chart showing the correlation between retail sales and GDP growth over the past decade, reinforcing the narrative that domestic consumption is a primary growth engine. The article also highlights the role of the “Consumer Credit and Financing” component, which has increased the accessibility of credit for middle‑class households.

Bottom Line

Samco MF’s CIO is clear: the immediate and most reliable market driver is domestic consumption, not the India‑US trade pact. While the trade agreement remains a strategic milestone, it is more likely to deliver incremental gains over a longer horizon. Investors are advised to concentrate on consumer‑driven growth sectors and keep a close eye on domestic economic indicators that will continue to shape the market’s trajectory in the coming months.