Crisil's Optimistic Outlook: Financial Conditions Index on the Rise

Crisil's Financial Conditions Index marked improvement to -0.3 in October, indicating easier financial conditions in India, although still below the long-term average. This rise is driven by renewed foreign portfolio investments and the Reserve Bank of India's reforms to enhance credit flow, amid stable economic conditions.

Crisil's Financial Conditions Index (FCI) increased to -0.3 in October, indicating that financial conditions in India have improved, though they remain below the long-term average. This change reflects heightened optimism regarding India's economic performance.

The rebound in the FCI was largely due to foreign portfolio investors returning to Indian markets, invigorating the debt and equity sectors amid easing US yields. October saw substantial FPI inflows totaling USD 4 billion, marking the year's highest and the first influx after four months.

Despite the favorable factors, liquidity moderation emerged as a concern, largely due to increased currency circulation and likely RBI actions to support the rupee. However, a 25-basis point cut in the Cash Reserve Ratio has cushioned the banking system, with GDP growth now projected at 6.8% for the fiscal year.

(With inputs from agencies.)