Investment Vs Consumption: What will drive India’s next growth cycle?

India’s private sector capital expenditure surged to Rs 6.56 lakh crore, a 66% jump since FY22. While this figure reflects a robust post-pandemic rebound, concerns are brewing. Projections suggest a 25% drop to Rs 4.9 lakh crore in FY26, though still higher than pre-COVID levels.

So, has India’s Capex boom peaked? If yes, could a quiet wave of consumption growth be building up, one that investors might still be unaware of?

This compelling shift formed the crux of one of the most thought-provoking panels at the HDFC Mutual Fund presents Moneycontrol Mutual Fund Summit 2025, powered by Axis Mutual Fund.

Sharing his insights, Shridatta Bhandwaldar, Head of Equities at Canara Robeco AMC, acknowledged the strong earnings delivery from investment-led sectors. “Public and private investments have driven meaningful growth. But with valuations stretched and public Capex nearing a plateau, we’ll need to go deeper, he noted, while adding that sectors like power transmission and renewables continue to offer promising opportunities.

The shift, away from heavy Capex, could create room for consumption to stage a comeback, according to Neelesh Surana, CIO at Mirae Asset Investment Managers (India). “Rural incomes are rising. Inflation is under control. Interest rates may ease. Add to that ₹4 lakh crore in revenue spending by the government and a potential Pay Commission boost, you have a strong foundation for bottom-up consumption recovery,” he explained. “Over a 2-3-year horizon, this segment could surprise on the upside.”

However, Ashish Gupta, CIO, Axis Mutual Fund, asked the investors to stay cautious. “Yes, demand may recover, but margins haven’t corrected, and valuations remain elevated. That limits upside. A broad re-rating seems unlikely,” he warned.

Adding a more grounded perspective, Rajeev Thakkar, CIO & Director at PPFAS Asset Management, requested the investors to look beyond the macro narratives altogether. “It’s not just about themes. It’s about whether a business has pricing power and the right model. IPL tickets may be selling fast, but entry-level scooters aren’t. That’s not macro, it’s company-specific. Investors need to look at underlying fundamentals, not just category trends.”

This high-impact session at the Moneycontrol Mutual Fund Summit 2025 explored a range of topics, from the resilience of SIP flows and outlook on small- and mid-cap valuations, to the growing relevance of global fund alignment. At the core of the conversation was how India’s mutual fund industry can build trust, scale responsibly, and drive sustainable wealth creation. To dive deeper into more insights from the summit, including India’s $1 trillion AUM ambition, click here.