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Investment momentum is likely to broaden beyond government-led infrastructure in the financial year 2026-27 (FY27), as lower interest rates, tax cuts, and easing tariff uncertainty encourage private capex, especially in consumer durables, logistics, retail and capital goods, according to a research report by Bank of Baroda Economic Research.
The brokerage, after analyzing 2,383 listed companies, found gross fixed assets grew 5.8 per cent in FY26 to Rs 46.7 lakh crore vs 7.4 per cent in FY25. While overall growth moderated due to tariff-driven uncertainty, sectors tied to domestic demand and government capex showed strong capital formation, setting the stage for a wider recovery in FY27. Nine sectors posted GFA growth above 10 per cent in FY26, accounting for 10 per cent of total GFA but growing 13.5 per cent collectively. Trading led at 33.3 per cent, followed by Electricals at 30.1 per cent. Infrastructure grew 19.7 per cent and Capital Goods 17.5 per cent, driven by front-ended government capex. Retailing expanded 17.8 per cent as companies added physical stores, while Healthcare and Chemicals grew 10.1 per cent and 10.5 per cent respectively. Alcohol, Diamonds & Jewellery also crossed 11 per cent. Credit growth tracked capex: Capital Goods saw 32.2 per cent bank credit growth, Diamonds & Jewellery 41.4 per cent, Healthcare 17.9 per cent and Trading 16.2 per cent, confirming asset expansion was funded, not just planned. A second set covering 51 per cent of GFA grew 7.1 per cent with 5-10 per cent growth. Crude Oil maintained 7.5 per cent growth on top of 7.1 per cent last year, while Iron & Steel stayed flat at 5 per cent as spare capacity kept firms cautious despite infra demand. Consumer Durables grew 8.5 per cent, Logistics 8.5 per cent, Paper 8.1 per cent and Construction Materials 5.7 per cent after 27.4 per cent in FY25. BoB notes durables built capacity ahead of tax cuts and income tax benefits in the Budget, while logistics and paper benefited from e-commerce spread. Realty recovered with 6.3 per cent growth after a 5.6 per cent decline in FY25, suggesting housing is back on track. Sectors with less than 5 per cent growth accounted for 39 per cent of GFA. Power grew just 1.6 per cent as investment shifted to renewables, while Telecom was flat at 0.2 per cent. Auto & Ancillaries grew only 3.1 per cent despite a 25 per cent base effect in FY25, with demand concentrated in premium cars. FMCG at 3.3 per cent reflected flat IIP growth and excess capacity. Textiles and Agri at 3.3 per cent and 4.1 per cent were hit by US tariffs. The 125 bps repo rate cut from Feb 2025 to Mar 2026, combined with Centre's capex push and consumer tax incentives, has created conditions for FY27 capex to widen. With tariff uncertainty easing, export-oriented sectors like textiles, agri and gems should gain confidence. Auto is expected to pick up as entry-level demand revives, and FMCG should follow higher disposable incomes. Logistics, durables and retailing look best placed to sustain double-digit asset growth as e-commerce and consumption scale up. Steel and power may stay conservative until capacity utilization tightens, but infra and capital goods will remain supported by public investment. If global trade stabilizes, the last set of cautious industries could join the capex cycle in FY27, lifting overall investment above FY26's 5.8 per cent. (ANI)
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