India to outpace global peers as growth slows worldwide: Kotak Report

Global economic growth is set to slow in the coming months, with major economies such as the United States and China projected to experience notable deceleration. However, India is expected to outpace global peers amid this global downturn, according to a recent report by Kotak Alternate Asset Managers.The report forecasts a 90 basis point slowdown in the US economy and a 60 basis point decline for China, while highlighting that India is expected to maintain its position as the fastest-growing major economy.A key factor supporting India's economic resilience is its strong manufacturing performance, with the Purchasing Managers' Index (PMI) figures continuing to indicate positive momentum—setting India apart from many global counterparts.Despite mixed signals from high-frequency indicators, India’s overall macroeconomic outlook remains robust. Although credit growth and government expenditure have shown some moderation, the report points to other encouraging trends that continue to support economic activity.Among them is a favourable monsoon forecast, which is expected to lift rural demand and improve the inflation outlook, providing a timely boost to the agricultural sector.Indian equity markets have also displayed significant resilience, despite softer-than-expected Q4 FY25 earnings and rising geopolitical tensions with Pakistan. The report notes that markets have rebounded sharply from recent lows.Investor sentiment remains buoyant, with Domestic Institutional Investors (DIIs) continuing as net buyers and Foreign Portfolio Investors (FPIs) returning to net buying positions for the second consecutive month. A declining risk premium on Indian assets has contributed to expanding equity valuations.Still, the report cautions that volatility may persist in the near term due to ongoing geopolitical uncertainties.The Indian rupee (INR) has also gained strength against the US dollar, backed by a combination of factors such as a weaker dollar, renewed FPI inflows, and falling oil prices—all of which have improved India’s trade balance.However, the upside in the rupee has been partly capped by the Reserve Bank of India, which used the currency's strength as an opportunity to build foreign exchange reserves. These reserves have surged by USD 50 billion, reaching USD 688 billion in just two months.Looking ahead, the narrowing yield gap between Indian and US 10-year bonds, along with sustained dollar weakness, is expected to keep the rupees relatively strong in the short term