Invest Guide July 2026

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Dear Investors,

Strong domestic fundamentals, including record GST collections, moderating inflation, healthy manufacturing activity, sustained government capital expenditure and ample liquidity, continued to support economic growth. However, geopolitical tensions in the Middle East, volatile crude oil prices, evolving U.S. trade policies, global monetary policy uncertainty and currency fluctuations contributed to intermittent market volatility. Nevertheless, India's robust macroeconomic fundamentals, improving corporate balance sheets and structural growth drivers continue to strengthen its long-term investment outlook.

India's Economic Fundamentals Continue to Inspire Confidence

India's domestic economy remained resilient despite global uncertainty. Record GST collections of ₹2.43 lakh crore in April 2026 reflected strong economic activity, improving compliance and formalisation, while May collections remained historically high. Continued expansion in manufacturing, services, infrastructure spending and government capex reinforced confidence in India's strong and resilient economic growth trajectory.

Inflation Stays Under Control Amid a Stable Monetary Policy Environment

India maintained macroeconomic stability as inflation remained below the RBI's 4% target despite global uncertainties. The RBI retained the repo rate at 5.25% in April and June while supporting liquidity through VRR and OMO operations. These measures lowered funding stress, sustained credit growth, stabilised financial markets, and supported banking, housing finance and interest rate-sensitive sectors

During Q1 FY27, the Indian Rupee came under considerable pressure owing to elevated crude oil prices following the Middle East conflict, sustained foreign portfolio outflows, a stronger U.S. Dollar and persistently high U.S. bond yields. Rather than relying solely on interest rate hikes, the Reserve Bank of India (RBI), in coordination with the Government of India, adopted a comprehensive strategy aimed at strengthening foreign exchange inflows, improving market liquidity and preserving confidence in India's external sector. The most significant measure was the introduction of a special FCNR(B) deposit scheme announced in the June 2026 Monetary Policy. Under this initiative, banks were permitted to mobilise fresh 3-5 year Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits until 30 September 2026, while the RBI agreed to fully absorb the foreign exchange hedging cost through concessional swap facilities. In addition, these deposits were exempted from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, substantially lowering funding costs for banks and enabling them to offer more attractive returns to Non-Resident Indians (NRIs). The measure is expected to attract US$35-40 billion of medium-term foreign currency inflows, similar in intent to the successful FCNR mobilisation undertaken during the 2013 currency crisis.

To further encourage overseas capital inflows, the RBI expanded the Fully Accessible Route (FAR) by allowing all newly issued 15-year, 30-year and 40-year Government Securities to be freely accessible to foreign investors without investment concentration limits. Simultaneously, eligibility for investment in Government securities and listed Indian equities was broadened to cover all person's resident outside India, thereby widening the potential foreign investor base and improving long-term capital inflows into Indian financial markets.

Recognising the financing challenges arising from volatile global markets, the RBI also introduced concessional foreign exchange swap facilities for banks and eligible public sector entities raising funds overseas. These facilities reduced hedging costs on external borrowings, making overseas funding more economical while increasing the availability of foreign currency within the domestic financial system.

On the trade front, the RBI restored the export realisation and repatriation period to nine months, providing exporters with greater operational flexibility while ensuring a steady flow of export proceeds into the country over time. This step sought to support trade competitiveness without compromising foreign exchange inflows.

Complementing the RBI's initiatives, the Government of India announced tax exemptions on capital gains and interest income earned by foreign investors in eligible Government securities, making Indian sovereign bonds more attractive to global investors and reinforcing efforts to strengthen the country's external financing position.

Overall, these coordinated measures reflected the RBI's preference for strengthening India's balance of payments through durable capital inflows rather than aggressively tightening domestic monetary policy. By encouraging NRI deposits, expanding foreign investment avenues, reducing hedging costs and improving access to Indian debt markets, the RBI aimed to stabilise the Rupee, bolster foreign exchange reserves and insulate the Indian economy from heightened global financial uncertainty while maintaining adequate liquidity to support domestic growth.

Global Geopolitical Developments Kept Financial Markets on Edge

Despite intermittent foreign institutional investor (FII) selling, Indian equity markets remained well supported by robust domestic participation. Monthly SIP contributions continued to remain above ₹30,000 crore, while mutual fund inflows and insurance investments provided significant stability to equity markets. Healthy domestic liquidity has increasingly reduced India's dependence on foreign capital and has emerged as a structural pillar supporting market valuations during periods of global volatility.

Global Monetary Policy and Elevated Bond Yields Tempered Investor Confidence

Global markets remained cautious as the U.S. Federal Reserve maintained a higher-for-longer rate stance. Elevated U.S. Treasury yields and a stronger dollar pressured emerging markets, while trade policy uncertainty affected export-oriented sectors. China's uneven recovery weighed on global trade and commodity demand, contributing to persistent market volatility and risk aversion.

Q1FY27 Earnings Preview - Domestic Sectors Expected to Outperform

The Q1FY27 earnings season is expected to reflect the resilience of India's domestic economy despite global uncertainties. Banking, capital goods, infrastructure, defence and pharmaceuticals are likely to deliver healthy performance, supported by strong demand, robust order books and export opportunities. Consumer and automobile companies may benefit from improving rural demand. However, globally exposed sectors such as IT, specialty chemicals, export manufacturing and metals could continue facing headwinds from cautious global spending, pricing pressure and China's uneven economic recovery

Equity Market Strategy - Navigating the Way Forward

Despite near-term global volatility, we remain optimistic on India's long-term growth, supported by strong macroeconomic fundamentals and structural reforms. We continue focusing on high-quality businesses with strong fundamentals across key domestic sectors while remaining selective in globally exposed industries. Disciplined investing, prudent asset allocation and a long-term perspective remain central to sustainable wealth creation.