Nuvama Predicts Economic Growth Pressure for India in FY27

Investment firm Nuvama reports that India's economic growth momentum may face pressure during the second half of FY27. The firm indicates that demand-related risks are beginning to outweigh previous cyclical tailwinds, specifically citing the fading impact of GST cuts and potential El Nino weather patterns as primary headwinds.

Nuvama identifies weak income and credit multipliers as contributing factors to the slowdown. While bank credit has accelerated, the firm notes that industrial lending is currently driven by working capital requirements rather than new capital expenditure, leaving broader economic activity weak. Consumption has also shown only marginal improvement despite government welfare spending and tax relief.

Despite these risks, Nuvama views India as relatively attractive compared to other emerging markets, pointing to moderated valuations and actions by the Reserve Bank of India to support the rupee. To mitigate risk, the firm recommends a defensive investment strategy, prioritizing sectors such as IT, consumer goods, private banks, cement, and chemicals over cyclical industries like automobiles and metals.