India’s domestic growth accelerates as corporate credit hits 13-year high despite foreign pullback

While foreign investors withdraw from Indian equities, a robust revival in bank lending and corporate borrowing underpins the country’s resilient domestic growth story, says Jefferies’ Christopher Wood.

Christopher Wood, Jefferies’ global head of equity strategy, says India’s domestic growth story is holding up even as foreign investors continue to pull money from the country’s stock market. In a note this week, Wood pointed to improving bank credit growth, stronger corporate lending and signs that the rupee is stabilising as reasons for his continued optimism.

According to Jefferies, overseas investors have withdrawn a net $25.4 billion from Indian equities so far this year, although they returned as net buyers in July with purchases worth $2.45 billion. Wood said that turnaround appeared to reflect, in part, a broader unwinding of global technology positions and should be watched closely.

The backdrop for that view is a sharp revival in Indian bank lending, particularly to companies. Recent reporting from The Economic Times shows that lenders are expecting double-digit corporate credit growth this fiscal year, supported by demand from infrastructure, renewable energy and manufacturing, while private banks have also reported stronger loan pipelines as companies shift away from bond funding and back towards bank borrowing.

Other reports have suggested that India is in its strongest credit expansion phase since 2012, with corporate loan growth hitting a 13-year high and household borrowing remaining resilient. Business Standard also reported that wholesale credit at major private banks picked up as pricing advantages for bonds narrowed, reinforcing the sense that corporate India is increasingly returning to bank finance. Taken together, the data support Wood’s argument that India’s domestic economy remains the main anchor for the market, even if foreign flows stay uneven.