From gold to green energy: 9 bets Smallcase investment managers are backing this festive season

Money managers at Smallcase have identified nine high-conviction sectors that are set to benefit from a combination of festive demand, policy reforms, and structural growth drivers. This includes sectors ranging from auto components and FMCG to defence and clean energy. India’s Navratri economy is gaining momentum with strong festive tailwinds. E-commerce sales are projected at Rs 1.2 lakh crore (up 27% YoY), UPI volumes have crossed 20 billion transactions in August, and MSME festive credit demand is set to rise 35-40% to Rs 3.45 lakh crore.

A release by Smallcase showed that investment managers note that the convergence of festive sentiment and tailwinds underlines why investment managers on Smallcase are bullish on the following nine sectors. They highlight that the ongoing festive season is a timely opportunity to align portfolios with India’s strongest growth stories.

Sectors in Focus

Auto Components (Views from Wright Research): Wright Research, an investment manager on Smallcase, highlights that auto demand is set for a festive rebound as GST 2.0 and auspicious buying windows is likely to lift consumer sentiment. The August 2025 retail sales grew 2.84% YoY (two-wheelers up 2.18%, PVs up 0.93%), with wholesale dispatches at 3.22 lakh PVs and 18.34 lakh two-wheelers. The manager notes that elevated PV inventories (around 56 days) signal strong festive deliveries ahead. Cooling CPI at 1.69%, an above-normal monsoon (over 8%), and the Rs 25,938 crore PLI-Auto/Components programme are easing costs and boosting rural liquidity. With exports holding a small trade surplus, higher offtake is expected in braking systems, tyres, batteries, and electronics as OEM runs stabilise and festive travel drives aftermarket demand.

Consumption & FMCG (Views of Wright Research, Niveshaay, SmartwealthAI, WealthTrust Capital): With GST 2.0 tax cuts improving affordability, brands passing on price benefits, and discretionary demand rising across autos, electronics, apparel, and small appliances, the outlook is for a multi-year consumption revival. They highlight that staples, beauty, and discretionary categories are expected to see sustained festive uplift. And that Navratri–Diwali 2025 is expected to act as a catalyst, reinforcing consumption as one of India’s most powerful structural growth themes.

Gold (By SmartwealthAI): The manager notes that this Navratri–Diwali, gold demand in India is poised for a strong surge, underpinned by both cultural tradition and global economic dynamics. US federal debt has soared from $5.7 trillion in 2000 to $35.5 trillion in 2024, flipping a $240 billion surplus into a $1.9 trillion deficit, while inflation has hovered at 2.7–2.9% and interest rates remain elevated at 4.5-4.6%. In response, central banks are diversifying reserves—gold’s share has climbed to 24%, its highest in 30 years, while the dollar’s share has slipped to 58%. India’s RBI is mirroring this trend with increased gold accumulation, aligning global strategy with domestic sentiment. Rising household incomes, GST-led consumption relief, and the cultural impetus of the festive season are likely to drive record gold purchases, making 2025 a year where gold is both a celebration of prosperity and a strategic hedge against macroeconomic uncertainty.

NBFCs (By GoalFi): The NBFC sector is riding a seasonal credit surge, with MSME festive loan demand estimated to rise 35-40% to Rs 3.45 lakh crore and auto loans expected to grow 18-19% this quarter. Overall credit growth is projected at 13-15% in FY25-26, supported by RBI liquidity injections of Rs 2.5 lakh crore via repo and CRR cuts. Outlook: The manager notes that with 70% of festive loan demand coming from smaller towns, NBFCs remain critical growth enablers for India’s credit cycle.

Pharmaceuticals & Healthcare (By GoalFi): India’s pharmaceuticals and healthcare sector is undergoing rapid transformation, driven by domestic demand, exports growth, and policy support. The sector is projected to grow at 12–14% CAGR over FY25–28, outpacing overall GDP growth. The manager notes that Navratri and the broader festive season often coincide with heightened health and wellness spending as consumers seek preventive care. Overall, India’s pharmaceutical and healthcare sectors are on a strong growth trajectory. The domestic formulations market is set to reach $65 billion by FY26, led by chronic therapies and specialty segments such as cardio-metabolic, oncology, and gastro-intestinal drugs, while telemedicine and e-pharmacy adoption drives 25% year-on-year growth in online prescription fulfilments. Pharma exports, supplying 40% of global generic demand, are expected to hit $35 billion by FY26, supported by regulated markets and contract manufacturing. Policy initiatives like the PLI scheme and the National Digital Health Mission are boosting manufacturing capacity and operational efficiency. Meanwhile, hospitals and diagnostics are expanding in tier 2 and tier 3 cities, with the hospital market projected at $100 billion by FY28 and diagnostic chains adding 500+ collection centers during the festive season.

Renewable Energy (By Niveshaay): Solar power has recorded 31% YoY in 2025, with India targeting 500 GW renewable capacity by 2030. EV penetration in two-wheelers is expected to reach 25% by FY30, supported by incentives like PM E-DRIVE. Battery Energy Storage Systems (BESS) and transmission infrastructure are also scaling rapidly. The manager notes that festive sentiment around mobility and sustainability aligns with long-term structural opportunities in renewables and EVs.

Capital Markets (By WealthTrust Capital): India’s retail participation is at record highs with 155 million demat accounts, more than double 2020 levels. Mutual fund SIP flows average Rs 21,000–22,000 crore per month, underpinning steady equity market liquidity. The Nifty Financial Services Index has delivered around 18% CAGR over the past decade. With financialisation of household savings accelerating, capital markets are positioned for sustained growth and wealth creation, notes investment manager on smallcase.

Infrastructure & Construction Equipment (By Kamayakya): According to the manager, government-led capex remains strong with a central allocation of Rs 11.21 lakh crore in FY26 (3.1% of GDP) and a Rs 1.5 lakh crore interest-free loan line for states. GST cuts on cement (28% to 18%) could lower project costs by 3–5%, while CE volumes are forecast to grow 2–5% in FY26 (1.43–1.47 lakh units). The manager said that infra activity during the festive quarter, coupled with private capex recovery, positions CE makers and contractors for higher utilisation in 2H FY26.

Defence (By Green Portfolio): Defence production touched Rs 1.50 lakh crore in FY25, while exports hit a record Rs 23,622 crore. The Ministry of Defence signed 193 procurement contracts worth Rs 2.09 lakh crore, with 92% awarded to domestic firms. The Ministry of Defence has now set a goal to reach Rs 50,000 crore in defence exports by 2029. The manager highlights that with Atmanirbhar Bharat driving self-reliance and global demand rising, the sector is entering a high-growth phase with premium valuations supported by strong order books.