On the equity market outlook, DSP identified large-cap stocks as the most attractive segment due to reasonable valuations. The firm said a recovery in revenue growth could provide these companies with stronger prospects for market outperformance…reports Asian Lite News Desk
India’s macroeconomic outlook is showing signs of improvement as softer oil prices, reduced foreign portfolio investment (FPI) outflows and attractive valuations of rupee assets strengthen the country’s economic fundamentals, according to a report by DSP.
The report said supportive monetary policy measures, improving liquidity conditions and a revival in domestic demand could help accelerate economic growth in the coming period.
“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 said.
The firm noted that stronger growth, particularly in nominal terms, could boost sales growth for Corporate India and improve overall business sentiment.
According to the report, India’s balance of payments outlook for FY27, which had earlier emerged as a market concern, is now expected to become a source of strength. Rising interest in rupee-denominated assets, favourable valuations and increasing foreign investment inflows have contributed to a more positive macro environment.
The report highlighted that India’s real effective exchange rate (REER) fell below 88 in May 2026, a level generally associated with periods of economic stress. However, the narrowing inflation difference between India and the United States reduces the long-term pressure for a faster depreciation of the rupee.
On the equity market outlook, DSP identified large-cap stocks as the most attractive segment due to reasonable valuations. The firm said a recovery in revenue growth could provide these companies with stronger prospects for market outperformance.
It also expects improving economic activity to support credit growth and demand recovery. Construction activity, in particular, could benefit sectors such as cement, where operating conditions are expected to improve.
The report noted that India’s position within emerging markets has become increasingly attractive. While technology stocks continue to drive much of the emerging market rally, India offers a more diversified opportunity compared with markets heavily concentrated in technology sectors such as South Korea and Taiwan.
Although information technology stocks in India remain inexpensive from a valuation perspective, the firm cautioned that growth concerns continue to weigh on the sector.
Overall, the report suggested that easing external pressures, improving domestic demand and favourable asset valuations could support a stronger economic trajectory for India in the months ahead.
