"Global growth set to decline; India relatively better placed" : Kotak

New Delhi [India], May 8 : Global economic growth is expected to decelerate in the coming months, with major economies like the US and China likely to see sharp slowdowns. However, India is expected to remain relatively resilient amid this global trend, according to a report by Kotak Alternate Asset Managers.

The report noted that the US economy is projected to slow down by 90 basis points, while China's growth could reduce by 60 basis points. However, India ti said is expected to maintain its position as the fastest-growing major economy.

One of the key indicators of India's economic strength is its robust manufacturing activity. The report mentioned that the country's Purchasing Managers' Index (PMI) numbers continue to show strong momentum, setting it apart from many of its global peers.

Despite mixed signals from high-frequency indicators, India's macroeconomic outlook remains healthy. While credit growth and government spending have been somewhat subdued, other positive developments are supporting the economy.

Notably, a favourable monsoon forecast is expected to boost rural demand and improve the inflation outlook, which could provide timely support to the agricultural sector.

The report also added that Indian equity markets have also shown remarkable resilience. Even though the fourth-quarter earnings for FY25 have been softer than expected and geopolitical tensions with Pakistan are brewing, the markets have rebounded sharply from recent lows.

Domestic institutional investors (DIIs) have continued to remain net buyers, and foreign portfolio investors (FPIs) have turned net buyers for the second consecutive month. A falling risk premium on Indian assets has also contributed to the expansion in equity valuations.

However, the report cautions that markets may remain volatile in the near term due to ongoing geopolitical uncertainties.

The Indian Rupee (INR) has continued to strengthen against the US Dollar, supported by several factors including a weaker dollar, renewed FPI inflows, and declining oil prices, which have improved India's trade balance.

The upside for the INR was somewhat limited as the Reserve Bank of India took advantage of the currency's strength to build up its foreign exchange reserves, which surged by USD 50 billion to reach USD 688 billion in just two months.

Looking ahead, the narrowing yield gap between Indian and US 10-year government bonds, combined with persistent USD weakness, is expected to keep the Indian rupee relatively strong in the near term.

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