BackHDFC Securities predicts India's GDP to double by 2030; identifies trends and stocks for sustained growth
HDFC Securities projected that India's GDP is likely to soar, from $3.57 tn in FY24E to $7 tn by 2030. The nation is witnessing decade-long economic trends that are propelling the expansion of businesses across diverse sectors. Let's take a look at these trends and stocks that will be impacted.
PremiumIn a recent report, brokerage house HDFC Securities projected that India's GDP is likely to soar, doubling from its current $3.57 trillion mark in FY24E to a substantial $7 trillion by 2030. This remarkable growth trajectory owes much to India's advantageous demographics and unwavering policy backing.
Notably, the nation is witnessing decade-long economic trends that are propelling the expansion of businesses across diverse sectors, said the brokerage. These include rising discretionary spending pools, digitisation, capex/infra investment, green energy adaptation, etc.
Read here: IMF raises India FY25 GDP growth outlook to 6.8%
First, let us in detail understand the ongoing trends the brokerage has come out with:
Rising discretionary spending pool and premiumization: The middle class of the country is expected to get more populous and richer, driving demand for discretionary goods and services. From 158 mn households in 2018, the middle class is poised to grow to 300 mn by 2030, representing 78 percent of overall households, the brokerage estimated.
Formalization of the economy: Low-ticket discretionary sectors have a higher presence of unorganised players. However, consolidation is underway, led by factors such as rising affordability, technology upgradation, GST, RERA, e-way bill, internet penetration and the recently launched ONDC. This consolidation process is expected to benefit organised players across multiple sectors, noted the brokerage.
Read here: RBI rate cuts now ‘off the table’ in FY25, says Morgan Stanley
Digitization: HDFC Securities highlighted the rapid increase in internet penetration and data consumption in India, driven by falling data costs. This growth has ignited the ambitions of emerging entrepreneurs and fostered a thriving startup ecosystem, resulting in the rise of 114 unicorns so far. Policy initiatives like UPI and ONDC play crucial roles in supporting these businesses. The firm noted that modern business models, leveraging the digital India stack, will continue to gain traction and disrupt traditional industries.
Financialization of savings: HDFC observed a shift in investor behaviour driven by increasing financial literacy and a quest for higher returns with liquidity. This trend is steering investors away from traditional avenues like real estate and fixed deposits towards more intricate asset classes such as mutual funds, equities, life insurance, portfolio management services (PMS), alternative investment funds (AIF), private credit, and derivatives. Despite occasional market fluctuations, brokerage firms predict a sustained healthy growth trajectory for asset and wealth management sectors as well as market intermediaries.
Read here: ADB revises India's FY25 growth forecast to 7%, citing robust investments
Capex/infrastructure investments: HDFC observed that the central government is prioritising investment-led GDP growth in India. This strategy is evident across sectors such as defence, transportation (roads and railways), and renewable energy. Additionally, the government encourages private sector capital expenditure, given their robust balance sheets and positive long-term demand prospects.
Areas like electric vehicles, manufacturing, alternative energy, and semiconductors are anticipated to see an increase in capital expenditures. Consequently, industries like capital goods, infrastructure, and cement stand to benefit from the ongoing capital expenditure cycle.
Green energy adoption: India is on the cusp of shifting to a green energy ecosystem from a fossil fuels-dominated one. This will involve green energy capacity creation of 340 GW by 2030 at a projected expenditure budget of ₹20 lakh crore. Renewables (Solar, Wind), Green hydrogen and EVs are key beneficiaries, said HDFC.
Manufacturing/China plus one: As per the brokerage, India can benefit immensely as global companies aim to diversify their supply chain and manufacturing away from China due to geopolitical tensions, trade war and rising labour costs. While it is a large lucrative growth opportunity, India must compete with other Southeast Asian countries to get its share in the business of the global giants. Auto ancillaries, Chemicals, Textiles, and Electronics manufacturing remain well poised to benefit from this trend, it stated.
Read here: Five reasons why we are looking beyond the RBI’s hawkish talk
Stock Recommendations
To benefit from the tailwinds of the above-mentioned trends, HDFC Securities has identified a list of stocks from our coverage universe that can compound their earnings consistently over the next 3-5 years while maintaining healthy return metrics and balance sheets.
The brokerage has recommended 10 stocks that are likely to witness consistent growth based on these themes. These are - SBI Life, Tata Power, Chola Investment, Voltas, Dalmia Bharat, Brigade Enterprises, MCX India, Amber Enterprises, Happiest Minds, and Neogen Chemicals.
Furthermore, the brokerage has also listed seven additional ideas from the mega-cap space (Market cap> ₹2 lakh crore) which in its view offer secular growth stories with healthy RoEs, thereby presenting themselves as low-risk high-visibility growth compounders.
All these companies are the leaders in their sectors and best suited to take advantage of the tailwinds of the sectors. HDFC's top picks from the mega-caps category are: RIL, ICICI Bank, L&T, Maruti Suzuki, NTPC, UltraTech Cement, and Siemens.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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