Jefferies Report Forecasts Strong Growth for Indian Markets

A research report from Jefferies Group indicates that India's domestic growth momentum and improving capital flows are likely to support national markets, offsetting weak equity exposure from foreign investors. Although foreign investors have been net sellers of Indian equities by US$25.4 billion year-to-date, they shifted to net buying of US$2.45 billion in July.

Domestic bank credit growth has reached a decade-high of 17-18 per cent year-on-year, driven by corporate lending at 20 per cent. The outlook for the rupee has improved following significant foreign currency inflows. These include US$41 billion generated by a Reserve Bank of India scheme for non-resident Indians and US$8.7 billion in government bonds since June.

The Reserve Bank of India has maintained a neutral stance and kept policy rates unchanged for four consecutive meetings. Jefferies strategist Mahesh Nandurkar predicts only one 25-basis-point rate hike will occur in the current cycle.