India’s economic growth has remained strong, with real gross domestic product (GDP) expanding 7.8 per cent year-on-year in Q1FY27, exceeding market expectations of 7.1 per cent. Manufacturing grew 9.2 per cent, while gross fixed capital formation rose 11.9 per cent during the quarter. However, the brokerage flagged risks to consumption in the second half of FY27, including rising borrowing costs, subdued rural sentiment and weaker kharif sowing. It also warned that prolonged geopolitical conflicts and crude oil prices around USD 100 per barrel could sustain cost pressures.
The report noted benchmark 10-year government bond yields had risen around 70 basis points in calendar year 2026, with yields likely to remain elevated until geopolitical tensions ease and inflationary pressures moderate. Higher interest rates are expected to support bank margins in the near term, although non-food credit growth could gradually slow towards the end of FY27. SBI Capital Markets expects FY27 to remain favourable for banks, while bonds could regain investor interest in FY28. The report also highlighted global uncertainty, with rising yields in advanced economies and capital outflows from emerging markets adding to financial pressures.