India's macro outlook improves as oil prices ease: Report
New Delhi, July 6
India's macroeconomic and growth outlook has improved as lower oil prices, easing foreign portfolio investment outflows and attractive valuations in rupee assets strengthened the country's macro fundamentals, a report said.
"RBI is likely to remain growth supportive with liquidity support. Yields are likely to fall over time. With available excess capacity and a demand revival shaping up, it is possible that India's growth outlook improves from here," the report from DSP said.
The firm noted that improving growth, especially nominal growth, is likely to spur Corporate India's sales growth.
The report said that FY27 balance of payments, once a market concern, is now likely to become a strength for the economy.
"With many rupee assets yielding better, rupee REER at an extreme, a wide segment of large-cap stocks at cheap levels and FPI debt inflows picking up, the India macro picture looks strong," it added.
India's REER fell below 88 in May 2026, a level usually seen only in major stress episodes, and the narrowing inflation gap with the United States weakens the long‑term case for faster rupee depreciation.
On equities, the firm recommended large‑cap stocks as the most attractive segment on valuation, arguing that if revenue growth recovers, these stocks have best odds of outperforming.
"Better growth is likely to percolate into stronger credit growth and improving demand. Construction activity is likely to result in a revival for the cement sector, which is staring at an improvement in operating performance," it said.
On Nifty IT stocks, the firm said they are cheap on valuations but have concerns around growth.
"The emerging market rally is running on one leg-technology. South Korea and Taiwan have made the EM index highly concentrated by sector and stocks. India now appears to be a contrarian buy within the EM basket," it added.
— IANS
Reader Comments
The report mentions large-cap stocks are attractive. But for retail investors like us, we need to be cautious - valuations might seem cheap but global uncertainties are still there. Let's wait and watch before jumping in. 📉🤔
Good to see the cement sector revival mentioned. Infrastructure is the backbone of our growth, and if demand picks up, it'll create jobs too. But we need to ensure this doesn't lead to inflation in construction costs. 🏗️🏠
Interesting perspective from DSP. However, I'm a bit skeptical about the REER falling below 88 - that's usually a sign of weakness, not strength. We need to see if this is sustainable or just a temporary blip. 📊🧐
The RBI being growth supportive is crucial right now. With elections around the corner, we need policies that benefit the real economy, not just stock markets. Hope the common man's wallet sees some relief too. 🙏🇮🇳
Great analysis. As an expat in India, I've seen this country's resilience. The fact that India is now a contrarian buy within EM basket tells me there's real value here. Exciting times ahead for those with patience! 🌏📈
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