India’s robust credit growth, renewed foreign investment, and positive domestic demand are strengthening its market position amid global volatility, with the rupee showing signs of recovery, according to Jefferies research.
India’s economic resilience and stronger capital inflows may help shore up its markets in the months ahead, even as overseas investors remain cautious, according to a Jefferies research note. The report said the domestic backdrop has improved enough to offset some of the pressure from persistent foreign selling, with credit growth, consumption and investment activity all holding up well.
Jefferies said bank lending is expanding at 17% to 18% year on year, the fastest pace in more than a decade, led by corporate loans, which are growing at about 20%. Lending to agriculture and retail is also rising briskly. The firm pointed to healthy demand in the automobile and property sectors as further evidence that domestic demand remains a key support for the economy, even as global markets stay volatile.
The rupee’s outlook has also brightened. Jefferies said the Reserve Bank of India’s programme to attract foreign currency deposits from non-resident Indians has already brought in about $41 billion and could draw as much as $80 billion to $100 billion before the scheme closes. Foreign investors have also put $8.7 billion into Indian government bonds since early June after interest income on those holdings was made tax-free. That has helped ease pressure on the currency, which Jefferies said had weakened to 96.96 against the US dollar in May before recovering to 95.17 at the time of the report.
The broader market picture remains mixed. While India saw net foreign buying of $2.45 billion in equities in July, helped by an unwind of the memory trade, overseas investors were still net sellers by $25.4 billion for the year to date. Jefferies strategist Mahesh Nandurkar said the Reserve Bank of India’s latest pause, its fourth straight meeting without a rate change, leaves room for only one 25-basis-point hike in the current tightening cycle. Separate Jefferies commentary on capital markets suggests the firm also sees momentum returning to India’s IPO pipeline, with expectations for a stronger finish to 2025 and a deeper market for large fundraisings and secondary sales.
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