India remains a relative outlier amid steady consumption and investment growth: Quant MF

Quant Mutual Fund trimmed exposure to gold and silver near peak levels and currently maintains a minimum allocation of around 10% to precious metals in its multi-asset strategy.

• India stands out globally with fiscal discipline and strong domestic demand.
• India to surpass Japan as 4th largest economy, fueled by strong consumption
• Quant Mutual Fund keeps at least 10% in precious metals in its strategy.

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India continues to stand out as a relative global outlier, supported by fiscal prudence, private consumption and services-led growth and improving earnings visibility, even as the US labour market shows signs of cooling, according to Sandeep Tandon, Chief Investment Officer, Quant Mutual Fund.

In his February note, Tandon said the 2026 Union Budget reinforces India’s commitment to fiscal consolidation, a structural positive for capital markets. The central government’s fiscal deficit for FY26 (revised estimates) is budgeted 8 basis points of GDP below the earlier estimate despite lower nominal GDP growth, indicating that the Covid-era surge in fiscal deficit has been fully unwound. The government’s adherence to its debt-to-GDP anchor is expected to remain supportive for bond markets.

Tax revenue projections for FY27 are based on a slightly conservative nominal GDP growth assumption of 10% and appear reasonable, Tandon said. Capital expenditure growth of 11.5% is marginally ahead of nominal GDP growth, with defence spending seeing a sharp increase of 22%, underscoring the government’s continued focus on investment-led growth.

Globally, Tandon highlighted the nomination of Kevin Warsh as Chair of the US Federal Reserve as a key monetary development early in 2026. Markets reacted positively initially, with equities firming and bond yields rising, as investors interpreted the move as signalling a more orthodox and credibility-driven approach to monetary policy. However, the appointment has also revived debate around the future path of interest rates, policy communication and the independence of the Federal Reserve.

While risk assets welcomed clarity on leadership, uncertainty around the timing and magnitude of US monetary easing persists. Tandon noted that opposing forces of quantitative easing and tightening are likely to coexist, contributing to volatility in global markets and reducing the long-term influence of US monetary policy.

The US dollar, despite brief periods of strength, has fallen to its lowest level in nearly four years, weakening against major currencies such as the euro and the yen. Tandon said the divergence between political messaging in favour of a “strong dollar” and market-driven currency weakness has added to volatility in foreign-exchange markets. He also pointed to renewed speculation around a potential US–Japan currency understanding following sharp weakness in the Japanese yen, though policymakers have denied any formal coordination.

At the same time, the US labour market is cooling, with major companies including Amazon, UPS, Dow, Nike and Home Depot announcing significant job cuts. Hiring has slowed sharply, and the duration of unemployment has risen to its highest level since 2021, reflecting broader corporate efforts to reduce costs and increase automation.

Against this global backdrop, India’s growth outlook remains resilient. India is expected to soon overtake Japan to become the world’s fourth-largest economy in nominal GDP terms, driven by strong private consumption, robust services growth and sustained investment activity. The Union Budget underlines fiscal discipline, while monetary policy appears to be at a favourable inflection point, with policy rates expected to remain low for an extended period.

According to the note, the September quarter marked the bottom of the earnings cycle, with a gradual improvement now underway. Lower interest rates and easing liquidity are expected to support lending and banking activity, even as global trade conditions remain challenging.

Market performance in January reflected global divergence. The Nifty declined 3.1%, while the S&P 500 gained 1.3%. Bitcoin fell 10%, the Dollar Index slipped 1.2%, and the US 10-year bond yield rose 7.5 basis points to above 4.2%. Precious metals posted strong gains, with gold rising 13% and silver up 19% during the month.

Quant Mutual Fund trimmed exposure to gold and silver near peak levels and currently maintains a minimum allocation of around 10% to precious metals in its multi-asset strategy. The portfolio, the note explained remains tilted towards large-cap stocks, with selective increases in mid- and small-cap exposure across equity and hybrid schemes.

Tandon said the fund remains constructive on large infrastructure companies, select non-banking financial companies, insurance, banking, hotels, pharmaceuticals, telecom and selective consumption themes, and has recently increased overall equity exposure across portfolios.