Weaker investment cycle, which impacts job creation, is the main reason behind the Indian economy slowing down, CLSA said in its latest report.

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In its report titled 'Slowdown – A different take', the brokerage firm said that the country's economy has slowed considerably over the last 12 months.

It highlighted a number of reasons that led to the slowdown including tightening credit supply to SMEs, continued high real interest rates, weakening business sentiment, weaker investment cycle impacting job creation, NPL pressures making bank risk-averse and slowing global growth.

However, the brokerage stressed that weaker investment cycle was the main reason behind the slowdown.

“Housing-driven GFCF (gross fixed capital formation) slowdown started from FY12 onwards and several underlying economic data points had also started slowing down since then. But the market ignored those trends as the data was impacted by various large factors like large oil price swing, taper tantrum, and then demonetisation, etc, which in turn created low base/high base impacts, making it difficult to analyse the real underlying trend," it explained in its report.

The research house added that early trends from the Q1FY20 results indicate that the consumption slowdown is not too deep at the moment with a few consumer companies reporting good numbers.

However, it said the commentary of HDFC Bank and Bajaj Finance raised some eyebrows on the outlook for retail lending businesses.

Among its favourite themes are housing recovery like DLF, GPL and other property developers, HDFC, LIC Housing, Ramco and Astral Poly Technik. From banks, it prefers ICICI Bank, Axis Bank and SBI.

Other preferred picks are Bharti Airtel and Reliance Industries.