Our analysis suggests demographics alone may contribute about 4 percentage points (ppt) of annual GDP growth for the next two decades, from increases in labour force, higher productivity due to urbanisation and having the right age structure.

If India gets its policies towards demographics wrong it could potentially lose annually about 1.5 ppt from our base case of +8% GDP growth till 2020. On the other hand, 'good' policies could push potential annual GDP growth to well above 9% over the next decade.

Demographics also has implications for consumption patterns, savings behavior, and financial flows. Even though all spending categories will likely increase, our analysis suggests that demand for services may grow faster than demand for goods. Spending on health and education services may increase five-fold by 2020, compared to a 2.5 times increase in food and beverages. Demand for autos and transportation, and housing and appliances may also increase by more than the overall increase in spending.

An important implication of falling dependency ratios will be rising household savings rates in India. Savings are being augmented with a rapid change in information and communication technology. A more connected population, with India's age profile may put a greater share of household savings into the financial sector.

Eoin Treacy's view India is a country whose financial markets have remarkable long-term upside potential. The country is one of a number in Asia where a confluence of demographics, improving standards of governance, technical ingenuity, gradually improving infrastructure and capital inflows are helping to drive a secular bull market. However, it will not all happen overnight, is subject to these conditions continuing to improve and right now the market is somewhat pricey on a P/E basis.

The Chart Library had 6 Indian sector indices, but I added 7 additional sector indices today. These are the BSE Healthcare Index, BSE Capital Goods Index, BSE Fast Moving Consumer Goods Index, BSE Public Undertaking Index, BSE Power Index, BSE Consumer Durables Index and the BSE Insurance Index

The Bombay Banks Index remains a notable outperformer and while overbought in the short-term, as it tests the 2008 high near 12,000, a sustained move below 10,000 would be required to break the progression of higher reaction lows and question scope for further medium-term upside.

The Bombay Autos Index has more than quadrupled since late 2008 and remains in a comparatively consistent uptrend. It is somewhat overextended relative to the 200-day MA but would need to sustain a move below that mean to question medium-term upside potential.

The Bombay Healthcare Index, in common with healthcare sectors in other emerging markets, particularly China, continues to rally impressively. The step sequence uptrend remains intact and a sustained move below the region of 5200 would be required to question medium-term uptrend consistency.

ITC, a subsidiary of British American Tobacco, Nestle India and Hindustan Unilever are prominent members of the Bombay Fast Moving Consumer Goods Index. It remains in a consistent uptrend and while somewhat overbought in the short-term, a sustained move below the 200-day MA would be needed to question scope for further medium-term upside. Also of interest is that the main listings of Nestle and Unilever have come under pressure of late. Both will need to find support in the current region if the consistency of their medium-term uptrends is to be sustained.

The Bombay Consumer Durables Index also continues to rally impressively and while somewhat overextended relative to the 200-day MA, a break of the progression of higher reaction lows, currently near 4350 would be required to question the consistency of the medium-term uptrend.

These sectors are the clear upside leaders in the India market. None are cheap and all offer leverage to the growing consumer economy. They are almost universally overextended in the short-term relative to their 200-day moving averages which suggests that the risk of a mean reversion pullback is rising. However, growth of the middle class is a secular theme and corrections are likely to offer promising buying opportunities over the medium term.