New Delhi, March 28 India’s economic challenges have troughed and trends in some key metrics indicate that the outlook is improving, a report said on Friday, adding that foreign institutional investors (FIIs) might have sensed this and have bought Indian equities worth $3.8 billion since March 20.
Above-average reservoir levels, increasing rural wages, lower tax rates and an improving job market are positives for the urban and rural economies, said the report by JM Financial Institutional Services.
The GDP grew at 6.2 per cent in Q3 FY25, picking up from the 5.6 per cent of Q2 FY25, food inflation has come off sharply over the last few months to 3.8 per cent in February.
“The RBI is likely to continue its policy easing measures with another 25bps cut in repo rates in its April meet and central government capex growth also picked up in December and January, and the outlook for FY26E is decent,” the report noted.
Data as of February end suggests that domestic institutional investors (DIIs) are sitting on a fairly large pile of cash, which is 5.4 per cent of equity asset under management (AUM).
Since September 2024, the Nifty50 has corrected 11 per cent from its top and valuations have come off from the peak.
“We believe that the mean reversion story has broadly panned out, leaving limited room for a downside hereon,” the report mentioned.
The rural economy should also do better in 2025 on the back of good monsoons and comfortable reservoir levels.
“Current reservoir levels are higher than long-term average levels. This has given confidence to the farmers and led to higher crop sowing, which should eventually reflect in higher income. The uptick in agricultural and non-agricultural wages should also drive higher disposable income,” the report noted.
The income tax cuts announced in the recent Budget, wherein the government has foregone revenue to the tune of Rs 1 lakh crore should place money in the hands of the urban population and drive discretionary spends.
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