India H2 2026 outlook: FPIs return, GDP at 7.7%, monsoon recovers
Synopsis
India's H2 2026 story is one of cautious resilience: FPIs flipped to net buyers for the first time since February, pumping in ₹20,200 crore in July, while GDP clocked 7.7% in FY26 and PMIs stayed comfortably in expansion. The catch — inflation above the RBI's target, elevated crude, and a murky global rate outlook mean this is a market for stock-pickers, not index chasers.
Key Takeaways
India's provisional FY26 GDP growth stands at 7.7 per cent ; the RBI projects FY27 growth at 6.7 per cent .
FPIs turned net equity buyers in July 2026 , recording inflows of approximately ₹20,200 crore — the first positive month since February .
Manufacturing PMI stood at 53.9 and services PMI at 53.1 in July, both firmly in expansion territory.
Bank credit growth reached 18.6 per cent YoY , with outstanding credit at ₹219.3 trillion as of June 2026 .
July CPI rose to 4.45 per cent , above the RBI's 4 per cent target; the RBI projects a potential Q3 peak of 5.9 per cent .
Monsoon July rainfall was 1 per cent above normal , narrowing the cumulative June–July deficit to 13 per cent below the long-period average.
India has entered the second half of 2026 on a broadly constructive footing, with foreign portfolio investors returning as net buyers, the monsoon recovering, and domestic growth momentum holding firm, according to PL Wealth's Market Outlook – August 2026 report released on Thursday, 27 August 2026. The report, however, cautions that elevated crude prices, geopolitical uncertainty, and a volatile global rate environment are likely to keep broad-based market rallies in check.
Growth and Earnings Backdrop
India's provisional FY26 GDP growth stands at 7.7 per cent, while the Reserve Bank of India (RBI) projects FY27 growth at 6.7 per cent. The Q1 FY27 earnings season has made a broadly steady start, lending further support to the domestic growth narrative.
July manufacturing and services activity remained firmly in expansion territory. The manufacturing PMI came in at 53.9 and the services PMI at 53.1 — both comfortably above the 50-point threshold that separates expansion from contraction.
Bank credit growth strengthened to 18.6 per cent year-on-year, taking outstanding credit to ₹219.3 trillion as of June 2026. Capacity utilisation remained healthy at 75.2 per cent, above its long-term average — a signal that industrial demand continues to hold up.
FPI Flows Turn Positive
After sustained equity outflows through the first half of the year, foreign portfolio investors (FPIs) turned net buyers in July 2026, recording equity inflows of approximately ₹20,200 crore — the first positive month since February. The reversal is seen as a meaningful confidence signal, though the report stops short of calling it a sustained trend given lingering global uncertainties.
Monsoon Recovery and Inflation Watch
Monsoon conditions improved materially through July, with rainfall arriving at roughly 1 per cent above normal for the month. This narrowed the cumulative June–July deficit to approximately 13 per cent below the long-period average — a significant improvement from earlier in the season that bodes well for the kharif harvest and rural demand.
Inflation, however, remains a key watchpoint. July CPI rose to 4.45 per cent, above the RBI's 4 per cent target, driven primarily by higher food inflation. The RBI has retained its FY27 CPI projection at 5.1 per cent, with a potential peak of 5.9 per cent in the third quarter.
What PL Wealth Recommends
Inderbir Jolly, Chief Executive Officer of PL Wealth, said the current environment calls for discipline rather than broad-based positioning. 'We believe this is a phase for investors to remain selective, focus on quality and deploy capital in a staggered manner. Our long-term conviction in India remains intact, supported by domestic investment, financial deepening, demographics and the country's structural growth opportunity,' Jolly said.
The report points to trade developments as an important medium-term external support factor, even as near-term risks — crude oil prices, geopolitical developments, and global rate uncertainty — warrant caution. Markets, the report suggests, are more likely to reward stock-picking than broad index exposure in the months ahead.
Point of View
But one month of inflows after a prolonged outflow phase is a data point, not a trend — and the report is careful not to overstate it. More telling is the persistence of above-target inflation alongside a slowing GDP trajectory: FY27's projected 6.7 per cent is a step down from FY26's 7.7 per cent, and a Q3 CPI peak near 5.9 per cent could constrain the RBI's room to ease. The PMI and credit numbers are genuinely strong, but the macro picture rewards selectivity, not optimism. PL Wealth's 'staggered deployment' advice is prudent — and implicitly an acknowledgement that the easy money from the post-pandemic recovery has already been made.
NationPress
27 Aug 2026
Frequently Asked Questions
What is India's GDP growth rate for FY26 and FY27?
India's provisional FY26 GDP growth stands at 7.7 per cent. The Reserve Bank of India projects FY27 growth at 6.7 per cent, according to the PL Wealth Market Outlook – August 2026 report.
Why did FPIs turn net buyers in July 2026?
Foreign portfolio investors recorded equity inflows of approximately ₹20,200 crore in July 2026, reversing sustained outflows from the first half of the year. The PL Wealth report attributes this to improving domestic growth signals and a steadier earnings season start, though it cautions that global uncertainties persist.
What is India's inflation outlook for FY27?
July CPI rose to 4.45 per cent, above the RBI's 4 per cent target, driven mainly by food inflation. The RBI has retained its FY27 CPI projection at 5.1 per cent, with a potential peak of 5.9 per cent expected in the third quarter.
How has the 2026 monsoon performed so far?
July 2026 rainfall came in approximately 1 per cent above normal, significantly improving the season's trajectory. The cumulative June–July deficit narrowed to around 13 per cent below the long-period average, which is positive for the kharif harvest and rural consumption.
What investment strategy does PL Wealth recommend for H2 2026?
PL Wealth CEO Inderbir Jolly recommends that investors remain selective, focus on quality, and deploy capital in a staggered manner. The firm maintains long-term conviction in India's structural growth story but warns that elevated crude prices, geopolitical risks, and global rate uncertainty make broad-based market gains unlikely in the near term.
