India's services sector 'epochal opportunity' for investors: Report

It comprised 55% of GDP in FY25 and has 'unprecedented momentum', it says

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India’s services sector contributed 55 per cent to the country’s gross domestic product in FY25, up from 40 per cent in the early 1990s and providing “wealth-creation opportunities”, said a report on Monday.

 

The sector is the cornerstone of India’s ambition to be a $5 trillion economy and an “epochal opportunity” for investors, said Axis Mutual Fund's report named Scaling New Hights-India's Service Sector Report

 

The sector grew at an average of 8.3 per cent annually in the post-pandemic period (FY23-FY25). Sub-sectors such as IT, financial services, healthcare, telecom and e-commerce are seeing “unprecedented momentum” due to digitalisation, rising incomes and urbanisation, it said.

 

For investors, this structural growth translates into potential wealth creation opportunities over the long term.

 

IT services are projected to grow 4-6 per cent in FY26 as companies tap into generative artificial intelligence and Cloud technologies.

 

Financial services continue their digital transformation, with mutual fund assets under management growing at over 20 per cent compound annual growth rate over the past decade. Health care reported a 62 per cent year-on-year expansion in March 2025, driven by tech adoption and rising demand.

 

Indian ecommerce’s size will triple from $103 billion in 2024 to $325 billion by 2030, making it one of Asia-Pacific’s fastest-growing markets, said the report.

 

Investment opportunity

The sector has consistently attracted the highest share of foreign investments, accounting for 19 per cent of all such inflows in FY25. Investors looking to benefit from this trend may consider:

 

Sector-focused mutual funds and exchange-traded funds, including those benchmarked to the Nifty Services Sector index, which posted a 10-year CAGR of 13 per cent.

 

Stocks in key sub-sectors like IT, BFSI, telecom, and healthcare that stand to gain from these structural shifts.

 

Emerging themes such as fintech, medtech and premium consumer services.

 

The report said that while the long-term story remains strong, investors should be mindful of short-term volatility, especially during global downturns. A diversified portfolio and long investment horizon are recommended.