With the steep fall in crude oil prices and worldwide commodity markets experiencing strain, India’s economic indicators demonstrate remarkable resilience compared to earlier international downturns, according to an analysis from Motilal Oswal.
Despite global uncertainties, India’s better performance can be attributed to domestic resilience and improved fiscal health, the report said.
“While there might be 2nd and 3rd order impacts on India in terms of IT slowdown and China dumping amidst probable currency wars, given its domestic resilience, the relative impact on economic growth may not be that pronounced”.
The report also highlighted the effective performance of key indicators such as the Balance of Payments (BoP), Current Account Deficit (CAD), and fiscal deficit when compared to earlier stress periods like the 2013 Taper Tantrum.
Unlike the Global Financial Crisis or the Credit Crisis, Indian corporates and banks are reflecting healthier balance sheets, significantly reduced debts and adequate capital buffers, the report said.
The report also acknowledged that while global developments such as an IT services slowdown or increased Chinese exports due to currency depreciation may bring some challenges, India is better positioned to weather them.
“The pendulum has swung the other way for all 3 drivers – fiscal, monetary and regulatory,” the report said.
Recent corrections in the equity market have made large-cap stocks, represented by the Nifty 50, more attractively valued, with prices falling below their 10-year forward averages.
However, the report cautioned that mid- and small-cap indices remain expensive, though opportunities are beginning to emerge in select areas.
The report advised a neutral stance on equities and recommended an active fund management strategy over passive investing. It highlighted that active funds have outperformed passive ones in FY25 across various categories, and this trend might continue.
For investors, it suggested a lump-sum investment in hybrid funds and a phased approach for large-cap, flexi-cap, mid- and small-cap funds over the next 2-3 months. In case of a deeper market correction, faster capital deployment is recommended.
On the fixed income side, it observed that recent RBI measures such as rate cuts and liquidity support have mildly steepened the yield curve.
