- The short (print, context, why it beat)
- What drove it: investment vs. consumption
- Earnings linkages into Q2/Q3
- Risks & watchlist (tariffs, monsoon, policy)
The short
- Headline: 7.8% YoY GDP growth in Q1 FY26 (five-quarter high).
- Nominal: ~₹86.05 lakh crore; GVA: ~₹44.64 lakh crore.
- Beat drivers: Services strength, construction push, supportive deflator, and front-loaded capex.
- Debate: Sustainability vs. tariff shock and food-price path; sets up earnings mix shift in Oct–Dec.
What drove it
Investment pulse
- Public capex remains the backbone; roads, rail, and urban spend lifted construction and core-sector demand.
- Private capex still selective but broadening in autos, electronics, data centers, and cement debottlenecking.
- Inventories & net exports added less than headline suggests; tariff uncertainty clouds Q2 exports.
Consumption blend
- Urban discretionary steady; premium continues to outpace value.
- Rural improving off a low base; mixed monsoon pockets keep the rebound uneven.
- Services (travel, hospitality, IT-enabled) anchor steady real growth.
Where it shows up in earnings (Oct–Dec reset)
| Sector | Transmission | Baselines to track |
|---|---|---|
| Banks (PSU & Pvt) | Credit demand up; benign credit costs | Loan growth, SMA/early delinquencies, LDR, NIM trajectory |
| Capital Goods/Infra | Order intake & execution velocity | Book-to-bill, working capital cycles, tendering pipeline |
| Cement/Building Mat. | Volume leverage as infra/housing lift | Dispatch growth, clinker factor, fuel cost tailwinds |
| Autos | PV steady; CV/HCV tied to freight cycle | Dealer inventory, booking mix, discounts |
| IT/Services | Domestic services resilient; global macro watch | Pricing, deal TCV, offshore mix |
| Consumer | Mixed: premium > mass; rural watch | Volume vs. value, grammage actions, RM basket |
Screens we like (illustrative)
- Ops leverage High fixed-cost absorption + order book visibility ≥ 1.8× sales.
- Clean WC Working-capital days < 45 with improving cash conversion.
- Pricing power Stable gross margins despite input volatility.
Risks & watchlist
- Tariffs: US duty overhang on select exports; monitor re-routing/re-quoting and MSME margin stress.
- Food inflation: Monsoon/reservoir prints → food CPI path into festivals.
- Policy: RBI’s Sep 29–Oct 1 meeting: cut timing vs. core disinflation.
Bottom line The 7.8% beat supports a quality-tilt into infra, select PSU banks, and materials—while keeping export-sensitive MSME risk on the dashboard.