India’s GDP grew 8.2% in Q2, marking the fastest expansion in six qtrs; What drove the surge?

Synopsis: India’s Q2 GDP growth surged to 8.2 percent, driven by strong manufacturing, services rebound, and resilient domestic consumption. This better-than-expected data is set to lift market sentiment, support institutional inflows, and strengthen outlooks across key sectors.

The Indian economy stands as the world’s fastest growing major economy, being supported by an outstanding nominal GDP of USD 4.19 trillion. The country’s growth consistently outpacing global peers, India’s strong economic momentum has reinforced its position as a leading powerhouse along with being a top destination for investors who are seeking high growth and long term opportunities.

The fastest GDP expansion 

India’s GDP surged by 8.2 percent in Q2 FY26, this has marked the fastest expansion in six quarters and solidifying India’s position as the world’s fastest growing major economy. The growth is being driven by a robust manufacturing rebound of over 9 percent, with this sector now contributing slightly above 16 percent of total Gross Value Added (GVA), up from 15.8 percent of last year. Financial, real estate, and professional services have remained the top growth driver, by expanding 10.2 percent to a nine quarter high, along with its GVA rising to around Rs 12.38 lakh crore. 

Trade, hotels, transport, communication, and broadcasting services have grown by 7.4 percent, while the construction space rose by 7.2 percent with the support of the public capex and real estate activities. Electricity, gas, water, and utilities have grown by 4.4 percent, while the mining sector has remained flat. Agriculture, livestock, forestry, and fishing also rose by 3.5 percent. 

Steady private consumption highlighted resilient household demand, strengthening domestic economic activity and even reinforcing a broad based recovery that is expected to continue throughout this fiscal year.

Market Reaction

Historically, high GDP growth has boosted sectors like- banking, capital goods, infrastructure, manufacturing, consumption, and IT. Stronger growth has typically driven higher credit demand, rising capex activity, improved industrial momentum, and healthier retail spending. This would benefit banks, PSU lenders, PLI scheme linked manufacturers, infrastructure companies, consumer focused sectors, and digital services. Along with macro fundamentals and rising investment flows, these sectors are expected to outperform as India enters a stronger growth cycle in FY26. 

Moreover, economists even linked the strong expansion to resilient consumer demand and front-loaded production ahead of the festive season. Following the upbeat data, Barclays has even revised its FY26 growth forecast upward to 7.2 percent from 6.8 percent, reflecting renewed confidence in India’s economic momentum. 

According to Chief Investment Strategist at Geojit Financial Services- Dr. V. K. Vijayakumar, the Q2FY25 GDP drivers and specifically the strong performers from manufacturing, services and consumption sector hold the potential to push the markets even higher.

What Investors need to look at 

Investors should closely watch RBI policy cues, as stronger GDP growth may support a pause in rate cuts, making inflation trends and liquidity management the key market drivers. Moreover, the upcoming Q3 and Q4 corporate earnings will be the ones indicating whether the 8.2 percent GDP momentum is going to translate into stronger profitability. Global factors such as- US interest rates, crude oil trends, and geopolitical developments will also shape FPI flows into the country. 

Additionally, rising anticipation around Budget FY26 will keep focus on fiscal deficit targets, government capex, and tax or any kind of regulatory changes. If the government maintains its capex-led strategy, then infrastructure-linked stocks could witness renewed buying, similar to what was seen post the Budget rallies of the previous fiscal years.

-Adithya Menon

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post India’s GDP grew 8.2% in Q2, marking the fastest expansion in six qtrs; What drove the surge? appeared first on Trade Brains.