Investment managers on Smallcase, an investment platform, are bullish on India's upcoming festive season, identifying nine high-conviction sectors expected to outperform, driven by strong consumption, supportive policy, and unprecedented retail participation in capital markets.
The managers believe that the festive season is likely to act as a significant market growth catalyst across diverse segments, including Auto Components, FMCG, Defense, and Renewable Energy.
This optimism is underpinned by robust data points underscoring the Navratri economy’s momentum. E-commerce sales are projected to hit Rs 1.2 lakh crore, marking a 27% year-on-year growth. August 2025 saw UPI volumes cross 20 billion transactions, while MSME festive credit demand is anticipated to surge 35–40% to Rs 3.45 lakh crore.
Here are the nine sectors Smallcase fund managers are bullish on:
Consumption and FMCG is entering a strong upcycle. Supported by a 13.9% FMCG value growth in Q2-CY25, led by rural recovery, overall FMCG sales are pegged at USD 211–245 billion in 2025. The outlook is for a multi-year revival, with staples, beauty, and discretionary categories seeing a sustained festive uplift.
Gold demand is poised for a strong surge, combining cultural tradition with a strategic hedge against macroeconomic uncertainty. The manager highlights that global trends, such as central banks increasing their gold reserves to 24%—the highest in 30 years—combined with rising domestic household incomes, are likely to drive record purchases this Navratri–Diwali.
The capital markets sector is positioned for sustained growth and wealth creation, driven by accelerating financialisation of household savings. Retail participation is at record highs, with 155 million demat accounts, more than double 2020 levels, underpinning steady equity market liquidity via robust mutual fund SIP flows.
The NBFC sector is riding a seasonal credit surge, with MSME festive loan demand set to rise significantly. Overall credit growth is projected at 13–15% in FY25–26, with NBFCs noted as critical growth enablers, particularly as 70% of festive loan demand originates from smaller towns.
Auto Components are expected to see a festive rebound, buoyed by factors like cooling CPI (1.69%), an above-normal monsoon, and the Rs 25,938 crore PLI-Auto/Components programme. The manager notes elevated PV inventories (~56 days) signal strong deliveries ahead, with higher offtake anticipated in components like tyres and batteries.
Pharmaceuticals and healthcare is projected to grow at a 12–14% CAGR over FY25–28, outpacing overall GDP growth. The sector benefits from domestic demand, export growth, and policy support, with festive demand often coinciding with heightened health and wellness spending.
Infrastructure and construction equipment is supported by robust government-led capital expenditure, with a central allocation of Rs 11.21 lakh crore in FY26. Forecasted growth in Construction Equipment volumes and potential cost reductions from GST cuts on cement are expected to boost utilisation in the second half of FY26.
Renewable energy is driven by significant structural shifts, including solar power’s 31% YoY growth in 2025 and the target of 500 GW renewable capacity by 2030. The festive sentiment around sustainability aligns with long-term opportunities in renewables and EVs.
Defense is identified as entering a high-growth phase. Defense production touched Rs 1.50 lakh crore in FY25, and exports hit a record Rs 23,622 crore. With the ‘Atmanirbhar Bharat’ initiative driving self-reliance and global demand rising, the sector’s premium valuations are supported by strong order books.