New Delhi: Amid all the tariff uncertainty, India’s macros remain on a strong foothold, an HSBC Mutual Fund report said on Monday, adding that it remains constructive on Indian equities supported by the more robust medium-term growth outlook.
Due to the tariff war and global outlook, demand for safe-haven assets has led to capital outflows and weighed on emerging market (EM) currencies, including India.
“India’s exposure to the US, its trade diplomacy, and the RBI’s steady hand and its policy approach have put India on the leaderboard amid the tariff concerns that have eclipsed business and growth outlook, globally,” said the outlook report.
India’s cooling inflation has provided the RBI MPC to focus on supporting growth by way of front-loaded policy easing. The MPC’s shift to a neutral stance implies that the scope for future cuts might be limited and also that it will remain data-dependent.
According to the report, the RBI will continue to focus on keeping system liquidity in surplus for faster monetary policy transmission to rates.
“We believe the growth cycle in India may be bottoming out. Interest rate and liquidity cycle, decline in crude prices and normal monsoon are all supportive of a pick-up in growth going forward,” the report suggested.
Although global trade-related uncertainty remains a headwind to private capex in the near term, “we expect India’s investment cycle to be on a medium-term uptrend supported by government investment in infrastructure and manufacturing, pickup in private investments and a recovery in real estate cycle”.
The report also expected higher private investments in renewable energy and related supply chain, localisation of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth.
Industry capacity utilisation based on RBI survey data is at a reasonably high level and indicates potential for an increase in private capex going forward. Also, continued expansion of the Production Linked Incentive (PLI) scheme is likely to further increase private investments in targeted sectors.
“We also expect higher private capex in renewable energy,” the HSBC report mentioned.
Real estate remains another strong medium-term growth driver, having weathered the impact of higher interest rates. Demand trends in top metro cities remain strong, and inventory levels have declined, it added.