India enters the second half of the year with several encouraging signals — foreign investors have returned as buyers, the monsoon has recovered and the domestic growth and earnings backdrop remain resilient
MUMBAI — India enters the second half of the year with several encouraging signals — foreign investors have returned as buyers, the monsoon has recovered and the domestic growth and earnings backdrop remain resilient, a new report showed on Thursday.
At the same time, elevated crude prices, geopolitical developments and an uncertain global rate environment mean that markets are unlikely to move in a broad-based manner, according to PL Wealth’s latest ‘Market Outlook–August 2026.’
“We believe this is a phase for investors to remain selective, focus on quality and deploy capital in a staggered manner. Our long-term conviction in India remains intact, supported by domestic investment, financial deepening, demographics and the country’s structural growth opportunity,” said Inderbir Jolly, CEO, PL Wealth.
The report finds that India’s domestic growth momentum remains resilient, supported by the return of foreign portfolio investors (FPIs) as net buyers, improving monsoon conditions and a broadly steady start to the Q1 FY27 earnings season.
India’s provisional FY26 GDP growth stands at 7.7 per cent, while the RBI projects FY27 growth at 6.7 per cent.
July manufacturing and services activity remained in expansion territory, with PMI readings of 53.9 and 53.1, respectively.
Bank credit growth strengthened to 18.6 per cent YoY, taking outstanding credit to Rs 219.3 trillion as of June 2026, while capacity utilisation remained healthy at 75.2 per cent, above its long-term average.
The report notes that inflation remains a key watch point. July CPI rose to 4.45 per cent, above the RBI’s 4 per cent target, driven primarily by higher food inflation, while the RBI has retained its FY27 CPI projection at 5.1 per cent, with a potential Q3 peak of 5.9 per cent.
Foreign investor flows, however, provided a positive signal. After sustained equity outflows through the first half of the year, FPIs turned net buyers in July, recording equity inflows of around Rs 20,200 crore — the first positive month since February. The report also highlights a strong recovery in monsoon conditions, with July rainfall around 1 per cent above normal, narrowing the cumulative June-July deficit to approximately 13 per cent below the long-period average.
India’s macroeconomic backdrop remains relatively resilient despite external pressures. On the external front, trade developments remain an important medium-term support.