SPA Capital Services Ltd Management Discussions

In 2024, the global economy expanded at a moderate pace of 3.3%, reflecting a period of relative stability despite ongoing geopolitical and economic disruptions. Ongoing geopolitical tensions, including the continued Russia-Ukraine war, the prolonged Israel-Gaza conflict, and several other regional flashpoints, weighed heavily on global sentiment in 2024. In early 2025, the United States announced sweeping tariffs, prompting retaliatory actions from major trading partners and adding a fresh layer of uncertainty to the global trade environment. Trade disputes influenced global stability and investment decisions as economies continued to navigate these challenges through strategic adjustments and policy responses. Inflationary pressures showed some signs of easing in 2024 due to improving supply chain efficiencies and moderating energy prices. However, global headline inflation is now expected to decline more slowly than previously anticipated, from 5.6% in 2024, now projected to ease to 4.3% in 2025 and 3.6% in 2026. This reflects upward revisions for advanced economies, partially offset by marginal declines in emerging and developing markets. Central banks across key regions are pivoting towards accommodative policies, helping improve credit availability and supporting investment sentiment over the medium term.

Looking ahead, the International Monetary Fund [IMF] forecasts global growth to moderate to 2.8% in 2025, before recovering slightly to 3.0% in 2026. Advanced economies are expected to grow at 1.4% in 2025 and 1.5% in 2026, supported by gradual monetary easing and fiscal adjustments, though trade realignments and supply chain shifts may temper the pace of recovery. Meanwhile, emerging markets and developing economies are projected to expand by 3.7% in 2025 and 3.9% in 2026, driven by resilient domestic demand, infrastructure investments, and accelerating digital transformation.

Source: IMF World Economic Outlook, April 2025

While the global economy continues to face heightened uncertainty, driven by trade disruptions, inflationary pressures, and financial vulnerabilities, particularly in emerging markets, signs of stabilisation are emerging.

Easing inflation in major economies, improving financial conditions, and anticipated monetary policy adjustments are expected to support a gradual recovery in global demand. At the same time, multilateral efforts around debt resolution, energy security, and supply chain diversification are likely to shape a more resilient and inclusive global growth path over the medium term.

The International Monetary Fund (IMF] has revised its forecast for Indias economic growth to 6.4 percent for both 2025 and 2026. Earlier in its April 2025 World Economic Outlook, IMF had projected Indias GDP growth at 6.2 percent for 2025 and 6.3 percent for 2026.

Reaffirming Indias position as the worlds fastest-growing major economy, IMF attributed the upward revision to a more benign external environment than anticipated in its April forecast. For India, projections are based on the calendar year, with the agency noting that Indias growth projections are 6.7 percent for 2025 and 6.4 percent for 2026 based on financial year data.

The IMF has also modestly raised its global growth outlook to 3.0 percent in 2025 and 3.1 percent in 2026, citing lower-than-expected impact from tariffs, a weaker US dollar, and improved financial conditions. China is forecast to grow at 4.8 percent in 2025 and 4.2 percent in 2026, while the US is expected to expand 1.9 percentin 2025 and 2.0 percent in 2026.¹

Indias growth story continues to draw global attention, backed by strong fundamentals and consistent performance. Real GDP, which measures the economys output after removing the effects of inflation, expanded by 6.5 per cent in 2024-25. The Reserve Bank of India expects this pace to continue into 2025-26. Other projections echo this optimism, with the United Nations forecasting growth of 6.3 per cent this year and 6.4 per cent next year, while the Confederation of Indian Industry places its estimate slightly higher at 6.40 to 6.70 per cent.²

Indias economic outlook for 2025 remains resilient and growth-oriented, underpinned by its strong position as the worlds third-largest startup ecosystem and an increasingly attractive investment destination. With over 1.8 lakh recognized startups and nearly 120 unicorns valued at over US$354 billion, India continues to demonstrate its innovation capacity, entrepreneurial depth, and ability to create large-scale employment. The governments proactive policy push such as Startup India, the National Data Governance Policy, and initiatives like the Agriculture Accelerator Fund—has further strengthened the ecosystem, enabling startups across technology, financial services, agritech, and consumer sectors to thrive.³

PE/VC investments in July 2025 totaled US$4 billion, 32% higher than the US$3 billion recorded in July 2024. The number of deals in July 2025 increased by 13 % year-on-year, with 115 deals compared to 102 in July 2024, and 14% higher than June 2025 (101 deals).

July 2025 saw 10 large deals totaling US$2.8 billion, reflecting a 82% increase in value compared to July 2024 (US$1.5 billion). Large deals accounted for 69% of overall PE/VC investments in July 2025. The largest deal of the month was CVC Capital acquiring 49% stake in Aavas Financiers for US$949 million.

Growth investments accounted for the largest share of PE/VC activity in July 2025, with US$2.0 billion deployed - a 290% increase in value over July 2024 (US$518 million). Credit investments ranked second, with US$792 million invested in July 2025, up 66% from US$477 million in July 2024. Private investment in public equity (PIPE) investments was the smallest segment at US$284 million, but 167% higher than the value recorded in July 2024 (US$106 million).

From a sector perspective, financial services led in July 2025 with US$1.8 billion, followed by real estate with US$481 million and technology with US$472 million.⁴

DOMESTIC ECONOMY REMAINS STEADY AMIDST GLOBAL UNCERTAINTIES

As per the first advance estimates released by the National Statistical Office, Ministry of Statistics & Programme Implementation (MoSPI), the real gross domestic product (GDP) growth for FY25 is estimated to be 6.4 per cent. From the angle of aggregate demand in the economy, private final consumption expenditure at constant prices is estimated to grow by 7.3 per cent, driven by a rebound in rural demand. PFCE as a share of GDP (at current prices) is estimated to increase from 60.3 per cent in FY24 to 61.8 per cent in FY25. This share is the highest since

FY03. Gross fixed capital formation (GFCF) (at constant prices] is estimated to grow by 6.4 per cent.

On the supply side, real gross value added (GVA] is also estimated to grow by 6.4 per cent. The agriculture sector is expected to rebound to a growth of 3.8 per cent in FY25. The industrial sector is estimated to grow by 6.2 per cent in FY25. Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion. Growth in the services sector is expected to remain robust at 7.2 per cent, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services. The analysis of growth trends in this chapter, hereinafter, is mostly based on the trends in the first half (HI] of FY25, on which the information base is more comprehensive.¹

NSO Press Release: Strong Start to FY26 with 7.8% GDP Growth

The National Statistical Office (NSO] released its press note on Q1 of FY 2025-26 (April-June 2025) on 29 August 2025, reporting that Indias real GDP grew by 7.8% year-on-year, while nominal GDP rose by 8.8% during the quarter. The data highlights strong momentum in the economy, led primarily by services and manufacturing sectors, which continued to expand robustly. This performance indicates that India has entered FY26 on a solid footing, with growth well above most international forecasts. The figures underscore the resilience of domestic demand despite global uncertainties, while also reinforcing Indias position as the fastest- growing major economy.

Key Highlights:

• Real GDP has been estimated to grow by 7.8% in Q1 of FY 2025-26 over the growth rate of 6.5% during Q1 of FY 2024-25.

• Nominal GDP has witnessed a growth rate of 8.8% in Q1 ofFY 2025-26.

• Agriculture and Allied Sector has observed the Real GVA growth rate of 3.7%, as compared to the growth rate of 1.5% registered in Q1 of last financial year.

• Secondary Sectors, prominently Manufacturing (7.7%) and Construction (7.6%) Sector has registered above 7.5% growth rate at Constant Prices in this quarter.

• Mining & Quarrying (-3.1%) and Electricity, Gas, Water Supply and Other Utility Services Sector (0.5%) has seen moderated Real growth rate during Q1 of FY 2025-26.

• Tertiary Sector (9.3%) has recorded substantial growth rate at Constant Prices in Q1 of FY 2025-26, over the growth rate of 6.8% in Q1 of FY 2024-25.

• Government Final Consumption Expenditure (GFCE) has bounced back, registering 9.7% growth rate in Nominal terms during Q1 of FY 2025-26, over the growth rate of 4.0% in Q1 of FY 2024-25.

• Real Private Final Consumption Expenditure (PFCE) has reported 7.0% growth rate during Q1 of FY 2025-26 as compared to the 8.3% growth rate in the corresponding period of previous financial year.

• Gross Fixed Capital Formation (GFCF) has recorded 7.8% growth rate at Constant Prices, over the growth rate of 6.7% in Q1 of FY 2024-25.

Real GVA in Q1 of FY 2025-26 is estimated at 044.64 lakh crore, against 041.47 lakh crore in Q1 of FY 2024-25, registering a growth rate of 7.6%. Nominal GVA in Q1 of FY 2025-26 is estimated at 078.25 lakh crore, against 071.95 lakh crore in Q1 of FY 2024-25, showing a growth rate of 8.8%.⁶

Mutual fund AUM scales

The mutual fund (MF) industry ended fiscal 2025 with assets under management (AUM) at a record Rs 65.74 lakh crore in March 2025 vs Rs 53.40 lakh crore in March 2024, marking an on- year rise of 23.11%. The expansion in the AUM was primarily driven by robust net inflows during the fiscal year, reflecting sustained investor interest. Additionally, mark-to-market (MTM) gains provided a supplementary boost, underpinned by positive performance in both equity and debt markets.

The asset base expanded partly owing to mark-to-market (MTM) gains, spurred by equity markets clocking positive returns, as reflected in the Nifty 50 TRI and Sensex TRI rising 6.0% and 5.9%, respectively. Debt markets also contributed positively through MTM gains, supported by favorable yield movements.

The increase in AUM was also attributed to net inflows summing up to Rs 8.15 lakh crore during fiscal 2025, with number of folios rising to an all-time high at end-March 2025. Investor participation grew, owing to the industrys efforts to widen awareness of MFs, investor education programmes and the popularity of systematic investment plans (SIPs). In fact, despite

bouts of volatility, investors stayed invested, demonstrating a long-term commitment to their financial goals.⁷

Growth and Key Milestones of the Indian Mutual Fund Industry as of July 2025

By 2014, mutual fund industry AUM had surged from ~INR 47,000 crore to ~INR 10 lakh crore. 20 In contrast, SIP AUM accounted for a small fraction, i.e. INR 1,000 crore in monthly inflows,21 owing to the limited adoption by the more prominent retail investor class stemming from low financial awareness, product understanding and investor psyche. The years 2015-2024 have been a defining period for the Indian mutual fund industry, characterised by significant democratisation of investment avenues, unparalleled growth, and a significant broadening of investor participation. As the industry evolves, it plays an essential role in supporting the vision of Viksit Bharat 2047 - a developed India characterised by inclusive and sustainable growth. After 2014, Indias mutual fund AUM grew exponentially, more than doubling of the global mutual fund AUM market share from 0.3% to 0.8% by 2023, 22 expanding from INR 10.8 lakh crore in 201523 to over INR 68 lakh crore by November 2024 (INR 53.40 lakh crore by March 2024) 24- a nearly sixfold increase. This exponential growth was fuelled primarily by retail participation, buoyant equity markets and structural shifts in the countrys mutual fund and capital market ecosystems, largely mainly by structural changes in the domestic mutual fund and capital markets ecosystem. Product innovation, regulatory reforms, technological advancements and a strong focus on investor education, key drivers of this transformation, have all been instrumental in overcoming the industrys existing challenges and positioning it on an unprecedented growth trajectory.⁸

India Mutual Fund Market Analysis by Mordor Intelligence

The India mutual fund market is valued at USD 0.85 trillion in 2025 and is projected to touch USD 1.17 trillion by 2030, reflecting a 6.62% CAGR. This healthy momentum stems from a confluence of regulatory modernization, digital distribution, and an enduring retail investment culture that took firmer root after the pandemic. New frameworks such as Specialized Investment Funds (SIFs) and Mutual Fund Lite have expanded the investable universe, bridging classic pooled vehicles with portfolio-management-style products while lowering operating hurdles for passive fund specialists. Equity funds continue to anchor the India mutual fund market as investors increasingly shift household savings away from fixed-income deposits toward long-horizon wealth creation. Rapid penetration of UPI-enabled micro-SIPs, coupled with growing comfort among first-time investors who use mobile apps for onboarding, reinforces steady inflows even in volatile markets. Although stricter expense-ratio ceilings and cybersecurity compliance add cost pressure, most asset managers consider technology investments and scale-driven efficiencies adequate countermeasures.

Monthly SIP inflows climbed to INR 26,632 crore in April 2025—an all-time high despite equity- market swings. SIP-linked AUM has reached 20.31% of industry assets, while active SIP accounts now exceed 8.11 crore, underscoring disciplined investor behavior during corrections. Ticket sizes are also trending higher, lifting average monthly contributions to INR 24,113 crore in FY 2024-25 and paving the way for INR 40,000 crore by 2027. Predictable cash receipts let fund houses extend investment horizons and curb redemption risk, which in turn supports portfolio resilience across market cycles. These structural improvements elevate the long-run growth ceiling for the India mutual fund market.

Key Report Takeaways

• By fund type, equity captured 58.97% of the India mutual fund market share in 2024 and is projected to advance at an 8.03% CAGR through 2030.

• By investor type, retail investors held 60.65% share of the India mutual fund market in 2024, while their assets are expected to expand at a 7.24% CAGR to 2030.

• By management style, active funds accounted for 74.19% share of the India mutual fund market in 2024; passive strategies are projected to grow at an 8.56% CAGR.

• By distribution channel, online trading platforms secured a 33.16% share of the India mutual fund market in 2024 and are anticipated to lead growth at 9.15% CAGR.⁹