Beating estimates and surprising economists, India’s Q2FY26 GDP growth surged to a six-quarter high of 8.2%, aided by strong manufacturing and consumption growth. In Q2FY25, India’s GDP growth was 5.6% while in the first quarter of the current financial year (Q1FY26), it was a five-quarter high at 7.8%.
The Q2 GDP growth is significantly above the 7.2% growth forecast by 15 economists in a Mint poll and the Reserve Bank of India’s latest projection of 7%.
Nominal GDP, economic expansion before adjusting for inflation, saw a growth rate of 8.7% during the quarter. Notably, nominal GDP growth had fallen to a three-quarter low of 8.8% in Q1FY26.
Broad-based growth
Experts highlighted that economic growth was broad-based on both GDP and GVA metrics.
“On the supply side, manufacturing and most service-sector categories registered strong expansion. Demand indicators echoed this trend, with private consumption and investment continuing to demonstrate healthy momentum,” said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Group.
Hajra believes that with real GDP expanding 8% in the first half of the financial year (H1FY26), full-year growth is now likely to exceed 7%, even if activity moderates slightly in the remainder of the year.
Garima Kapoor, Deputy Head of Research and Economist, Elara Capital, believes FY26 GDP growth will now see an upside and will be close to 7.5%- way above RBI’s and government’s estimate.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted that the impressive growth reflects a robust economy chugging along despite the Trump tariffs.
“The standout performance is the 9.1% growth in manufacturing and the 7.3% growth in Gross Fixed Capital Formation. The 7.9% growth in private consumption expenditure also indicates a revival of consumption. This is despite the postponement of consumption in September in anticipation of GST cuts. Now, 7.2% GDP growth is achievable in FY26,” said Vijayakumar.
Can strong Q2 numbers trigger a sharp uptrend in the Indian stock market?
Q2 GDP did come surprisingly stronger; experts believe the domestic market may see a limited impact of it because the full impact of US tariffs will be reflected in the October-December quarter (Q3) GDP data. However, Q3 will also see the effect of the GST cut and strong festive demand.
Nevertheless, the Sensex and the Nifty 50 may see some momentum, but the mid and small-cap segments may not see much action due to elevated valuations and liquidity constraints.
“GDP data is positive, but I don’t think it will be a driving factor for the broader market because of the tight liquidity situation,” said G Chokkalingam, the founder and head of research at Equinomics Research Private Limited.
“Sensex and Nifty 50 would keep rising. By the end of this financial year, a 3-5% upside in them is possible, supported by healthy macro,” said Chokkalingam.
A deluge of IPOs has drained retail liquidity that would have otherwise been invested in the secondary market.
Additionally, experts note that many retail investors enter IPOs primarily for listing gains and short-term profits. With most newly listed stocks now trading below their issue prices, liquidity has been trapped as investors stay invested to avoid booking losses.
According to Vijayakumar, the Q2 GDP numbers are a shot in the arm for bulls who will be emboldened to take the rally forward, but it may delay the RBI rate cut.
“A fallout from these numbers is that a rate cut is unlikely in December. The economy doesn’t need another monetary stimulus now,” Vijayakumar said.
The Indian economy remains in solid shape, and experts expect the growth momentum to continue going into the next financial year. However, in the near term, the market sentiment will be significantly impacted by developments on the India-US trade deal front and Q3 earnings trends. If a trade deal is finalised and Q3 earnings come on expected lines, the Indian stock market may see a sustained and significant rally.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
