Jefferies sees brighter India outlook as credit, capital flows ramp up; removes HDFC Bank in portfolio revamp

Lenskart Solutions

07/08/2026 07:49

By Bharath Rajeswaran
Aug 7 (Reuters) - India's market outlook is strengthening as bank credit growth reaches its fastest pace in more than a decade, foreign equity inflows return and central bank measures support the rupee, according to Jefferies.
"There are some positives to be aware of as regards the Indian domestic story," Christopher Wood, Jefferies' global head of equity strategy, said in his latest GREED & fear note published on Friday.
Against this backdrop, Jefferies has reshaped its India long-only portfolio. HDFC Bank HDBK.NS, India's largest private lender and the heaviest stock in benchmark indexes, is being removed alongside PolicyBazaar-owner PB Fintech PBFI.NS. 
MCX MCEI.NS and Lenskart Solutions LENS.NS will replace them, while REC RECM.NS makes way for Bajaj Finance BJFN.NS. Eternal's ETEA.NS allocation rises by one percentage point, funded by a reduction in Bharti Airtel BRTI.NS.
Foreign investors bought a net $2.12 billion of domestic equities in July as India benefited from the unwind out of the memory chip trade. However, they remain net sellers for the year, with outflows totaling $25.86 billion, according to National Securities Depository.
The more important signal, Wood said, is the acceleration in domestic lending, which has climbed to 17–18% year-on-year, led by corporate lending of about 20%. Loans to agriculture and retail borrowers are also expanding at healthy rates, underscoring broad-based demand.
Policy-driven inflows are adding a macro cushion. The Reserve Bank of India's foreign-currency inflow scheme, including non-resident deposits, external commercial borrowings and foreign-currency bonds, had mobilized about $41 billion by the end of July, and Jefferies expects inflows to reach $80 billion–$100 billion by the September 30 deadline.
The removal of tax on interest income on foreign purchases of government bonds has also generated $8.7 billion in net inflows since early June, per exchange data.
"All this increases the likelihood that the rupee should stabilise," Wood said. The currency recovered to 95.17 per U.S. dollar, as of July 31, from a low of 96.96 in May.     

 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))