Another key factor driving optimism is the upcoming 8th Pay Commission, which is expected to boost consumer demand. According to UBS estimates, this could increase gross domestic product (GDP) by just over one percentage point over the next two years. “It only happens every five years,” Issel stated, calling it a meaningful earnings trigger, especially for consumer-facing sectors.
UBS expects double-digit earnings growth for Indian companies over the next two years. Following a strong 25% growth in 2023-24 (FY24), a reset to about 7% growth in the latest fiscal year creates a low base, making it easier for companies to outperform going forward. “If I compare myself with 7%… that’s much easier to beat,” Issel explained, adding that the earnings cycle could pick up across financials and consumption by 2026-27 (FY27).
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Issel clarified that UBS’s optimism isn’t based on the ongoing US-India trade discussions. “It’s not no longer so much for trade reason,” he said, suggesting that markets may have already priced in expectations on that front.
That said, UBS does expect India to announce an interim trade agreement with the US before July 9. “It will not be the final deal… but that interim is reached before July 9, and that’s… a given,” Issel stated, hinting at recent diplomatic momentum between the two countries.
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For the entire interview, watch the accompanying video
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