Consumption Revival Expected in FY26; Positive on BFSI, Healthcare, Says Amit Premchandani of UTI Mutual Fund

Mumbai, June 5, 2025 – The Indian economy is poised for a significant consumption revival in the fiscal year 2025-26 (FY26), driven by improving consumer sentiment, rising disposable incomes, and a stable macroeconomic environment. Amit Premchandani, Chief Investment Officer at UTI Mutual Fund, expressed a cautiously optimistic outlook, highlighting robust growth prospects in the Banking, Financial Services and Insurance (BFSI) and healthcare sectors as key beneficiaries of this consumption uptick.

Consumption Recovery Gains Momentum

After a phase of moderation in consumer spending amid inflationary pressures and global uncertainties, FY26 is expected to mark a clear rebound in consumption demand. Premchandani noted, “The sustained improvement in rural incomes combined with urban discretionary spending revival will act as critical pillars supporting the consumption cycle. With inflation moderating and interest rates steadying, consumer confidence is set to strengthen.”

This expected revival is backed by favorable demographics, rising wage growth, and government stimulus measures aimed at rural and semi-urban India. The robust pickup in demand for consumer durables, automobiles, and discretionary services signals that the Indian consumer is regaining confidence, a trend that is likely to accelerate through FY26.

Positive Outlook on BFSI Sector

The BFSI sector stands out as a key growth engine in the anticipated consumption rebound. According to Premchandani, “The BFSI segment is uniquely positioned to benefit from the consumption revival due to its direct linkage with credit growth, financial inclusion, and increasing penetration of insurance products.”

Credit growth, particularly retail and SME lending, is expected to accelerate in FY26, driven by higher demand for personal loans, housing finance, and vehicle financing. Additionally, the insurance sector is witnessing a structural transformation with rising awareness and regulatory push, further enhancing growth prospects. Premchandani added, “We expect the BFSI sector to continue delivering robust earnings growth, supported by improved asset quality and prudent risk management.”

Healthcare Sector: A Structural Growth Story

Healthcare remains a sector with long-term growth visibility, and FY26 is expected to see a continuation of its positive trajectory. “Demographic shifts, increased health awareness post-pandemic, and higher discretionary healthcare spending will drive the sector’s growth,” said Premchandani.

The rising incidence of lifestyle diseases, growing penetration of health insurance, and government initiatives to improve healthcare infrastructure are expected to underpin demand for healthcare services and pharmaceutical products. Digital health platforms and telemedicine are also emerging as new growth avenues, adding to sector optimism.

Macroeconomic Context and Market Sentiment

India’s macroeconomic fundamentals continue to be supportive of a consumption-led growth model. GDP growth is projected to hover around 6.5%-7% in FY26, supported by domestic demand and a relatively stable global environment. Inflation, a key concern in recent years, is expected to moderate to the 4-5% range, enabling the Reserve Bank of India (RBI) to maintain a steady monetary policy stance.

Market sentiment reflects this cautiously optimistic view. The equity markets have shown resilience with steady inflows from domestic institutional investors. The broader market indices such as Sensex and Nifty 50 have recovered from recent volatility, reflecting confidence in earnings growth across consumption-linked sectors.

Investor Outlook: Opportunities and Risks

For investors, the consumption revival presents multiple opportunities, especially in high-quality BFSI and healthcare stocks. Premchandani recommends a balanced approach: “Investors should focus on fundamentally strong companies with scalable business models, strong management, and robust balance sheets. BFSI and healthcare sectors offer attractive risk-reward profiles given their growth potential.”

However, he also cautions about potential risks such as geopolitical tensions, global economic slowdowns, or sudden inflationary shocks that could dampen consumption demand. “Staying vigilant and diversified remains key in navigating the evolving market landscape,” he advised.

As FY26 unfolds, India’s consumption story appears set for a robust revival, supported by improving consumer sentiment, favorable demographics, and sector-specific growth drivers. The BFSI and healthcare sectors, in particular, are positioned to deliver sustainable growth, making them attractive bets for investors seeking exposure to the consumption theme.

Amit Premchandani’s insights underscore the importance of a disciplined investment approach, focused on quality and growth, as India’s economy embraces its next growth phase powered by consumption.