Recovery across key sectors 'surprisingly strong': Nomura

New Delhi: The recovery of Indian economy is very much on track in key sectors and factors like favourable monsoons and additional spending by way of pay commission awards may add to this recovery, says a Nomura report.

According to the Japanese financial services major, the magnitude and breadth of recovery across sectors is "surprisingly strong".

"In our view, the recovery is very much on track and evidence is now getting stronger that a synchronous recovery is now on the way," Nomura said in a research note.

As per the report, the annual YoY growth rates for eight key production and real activity indicators have sharply recovered this year.

Notwithstanding the fact that economy is still battling the effects of two consecutive failed monsoons, a global slowdown and poor private capex spending, a multitude of factors are causing the recovery, it said.

"The most important reason, we believe, is that government capex is no longer being dragged down by declines in private capex," Nomura said.

It further noted the potentially favourable monsoons this year and additional spend in the economy by way of pay commission awards may add to this recovery later this year.

Moreover, a pick-up in private capex is likely in fiscal 2017-18 and this in turn would sustain this recovery, it said.

Nomura noted it is "positive" on markets and expects a 15-25 percent return this year, depending on the global macro backdrop.

Sector-wise, the firm is overweight on financials, discretionary consumption plays (autos), IT services, oil&gas and industrials and underweight on consumer staples, pharma, metals and telecom.