- Bank credit growth in India hit a decade-high of 17-18% year-on-year
- Indian government bonds became tax-free for foreign investors in June
- Rupee stabilised, supported by bond inflows and RBI’s NRI deposit scheme
Foreign investors have pulled a net $25.4 billion out of Indian equities so far this year, a scale of selling that has weighed on sentiment even as the broader market has held up on the back of resilient domestic flows. Against that backdrop, most global strategists have stayed cautious on India, waiting for clearer signs that the outflows are turning before committing fresh conviction to the market.
Christopher Wood is not waiting. Jefferies' influential Greed & Fear strategist continues to run India as his largest overweight within Asia Pacific ex-Japan, and his latest note lays out the case in detail, backed by credit data, currency moves and policy changes that he believes are turning the domestic story more constructive even as the headline flow numbers stay negative.
1. Foreign equity buying has finally turned positive
India saw $2.45 billion of net foreign buying of equities in July, with the market having "benefited from the unwind out of the memory trade event," Wood writes. It is a modest number against the year-to-date deficit, but a directional shift he flags as worth watching.
2. Bank credit growth is at a decade high
System-wide bank credit growth has accelerated to the 17-18% year-on-year range, "the highest growth in more than a decade," according to the note. Wood treats this as the clearest signal that domestic demand, rather than foreign flows, is now driving the growth story.
3. Corporate lending is leading
Within that credit expansion, corporate loans are growing fastest at 20% year-on-year, ahead of agriculture loans at 17% and retail loans at 16%. Jefferies' India research head Mahesh Nandurkar notes that "auto and property demand also remain healthy."
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4. Government bonds now tax-free for foreign investors
Ownership of Indian government bonds was made tax-free for foreign investors in early June. As a result, "there have been net inflows of US$8.7bn since the start of June," the note states.
What's working for the Indian market versus global peers
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5. RBI's NRI deposit scheme has outperformed
A separate RBI scheme to attract foreign currency deposits from non-resident Indians has already pulled in $41 billion, expected to double by September. Wood notes NRIs have been "leveraging 9-19 times to generate a dollar return of 11-20%" in what is viewed as a risk-free trade. It marks the third time Delhi has used such a scheme to support the rupee, after 1993 and 2014.
6. Rupee is stabilising
Having "bottomed at 96.96 in May," the rupee "is now 95.17," per the note. Combined with the bond and deposit inflows above, Wood sees the currency backdrop turning more supportive after a prolonged period of weakness.
7. India remains an active overweight, not a passive holding
Wood runs India at a 12% weighting in his Asia Pacific ex-Japan portfolio against a benchmark weight of 11.4%, and continues to hold Indian government bonds in his global sovereign debt portfolio. Taken together, he writes, "all this increases the likelihood that the rupee should stabilise," a view that stands in contrast to Indonesia, which he exited entirely in October 2025 and has stayed away from since.
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