Christopher Wood, Global Head of Equity Strategy at Jefferies, noted in his weekly investor note GREED & fear that India continues to show growth due to improving domestic economic indicators. He reported that in July, foreign investors became net buyers of Indian stocks, channeling $2.45 billion into the market, while global investors were closing positions in the tech 'meme trade.'
Based on a positive outlook for the Indian market and specific domestic trends, Wood restructured his long-term portfolio focused on India. As part of this reorganization, he sold shares of HDFC Bank and PB Fintech, replacing them with Multi Commodity Exchange of India (MCX) and Lenskart Solutions. Additionally, he swapped REC Limited for Bajaj Finance and increased his stake in Eternal, while reducing his investment in Bharti Airtel.
According to Wood, India's domestic economy is benefiting from improving fundamentals as bank lending growth accelerated to 17-18 percent year-on-year by 2026 (as of the two weeks ending July 15, 2026), which is the fastest pace in over a decade. Corporate lending was the main driver of this expansion.
Wood emphasized that the strongest area of growth is in corporate lending, which is currently growing at 20% year-over-year. This compares with agricultural sector loan growth at 17% year-over-year and retail loan growth at 16% year-over-year. Demand in the automotive and real estate sectors remains consistently high.
Furthermore, Jefferies pointed to several factors that could contribute to the stabilization of the rupee in the coming months. One such factor is the program launched by the Reserve Bank of India in early June to attract foreign currency deposits from Non-Resident Indians (NRIs). This initiative has already attracted about $41 billion, exceeding expectations, and inflows are expected to rise to $80-100 billion over the next two months.
Wood noted that, according to his information, NRIs are using leverage ratios of 9 to 19 times to achieve dollar returns of 11-20 percent, viewing it as a risk-free investment because it is guaranteed by the Government of India. He added that this is the third time Delhi has resorted to such a scheme to strengthen its weak currency; previous instances were in 1993 and 2014, and that the beneficiaries are NRIs while the taxpayer bears the cost.
Another supporting factor is the government's decision to exempt foreign investors from paying tax on interest income derived from investments in Indian government bonds. According to Wood, this tax incentive has already led to an increase in sovereign bonds and is likely to stimulate further inflow of foreign capital into the debt market. Wood concluded that all these measures increase the probability of rupee stabilization, and he maintains a constructive view on Indian government bonds in his global sovereign debt portfolio.
