"Indian gold demand should recover from here. The country has traditionally been a dominant force in the gold market and last year it accounted for 28 per cent of global fabrication demand. Looking ahead, we expect Indian imports to pick up significantly, both for seasonal reasons and as importers slowly adjust to the new regime," the report said.
Indian demand tends to pick up around key festivals and the wedding season from mid-September. Price also plays an important role and sharp dips tend to see consumers restocking the commodity.
Local traders and sources estimate that India might see an upswing in bullion imports to 35 tonne in September, which is still modest compared with the official average import level of 59 tonne in the same month last year.
October is also likely to see relatively firm imports.
It said: "We expect USD-Rupee to stabilise in H2-FY14 on a narrower current account deficit, better global risk appetite and improved capital inflows in the economy. We forecast USD-Rupee at 64 by December 2013. This stability should see gold scrap supplies diminish and should support higher gold imports.
"Gold prices can rally from here, but we see limited upside due to US fed's decision to withdraw its easy money policy."
This year the monsoon season was good and farmers planted 7 per cent more crops, according to the Agriculture Ministry.
This should feed through into higher incomes and gold demand in the weeks ahead, the report added.
Recent weeks and months have seen aggressive government action to dampen gold demand, owing to its heavy impact on the current account deficit.