Synopsis
A recent Morgan Stanley report reveals that India's equity market is thriving, characterized by strong fundamentals that promise growth. Factors such as population increase, democracy, and improved social outcomes position India as a significant player in the global economy over the coming decades.Key Takeaways
- India is becoming a major consumer market.
- Strong growth predicted in GDP for FY25 and FY26.
- Valuations are currently attractive post-Covid.
- Financials are outperforming and expected to maintain this trend.
- Stock picking is essential in the current market environment.
New Delhi, March 11 (NationPress) The Indian equity landscape appears appealing — characterized as a stock pickers' market — as the nation is poised to increase its share in global output over the next few decades. This growth is fueled by several strong foundational factors, such as significant population growth, a functional democracy, macro stability driven policies, enhanced infrastructure, a burgeoning entrepreneurial class, and improved social outcomes, as highlighted in a report from Morgan Stanley on Tuesday.
The report suggests that India is on track to become the world’s most desirable consumer market, undergoing a substantial energy transition, with expectations for credit to GDP to rise and manufacturing to capture a larger portion of GDP.
“Recent high-frequency indicators have shown mixed results but are noticeably better than they were a couple of months ago. We anticipate a growth recovery following a slowdown in H2 2024, supported by fiscal and monetary policies, along with a rebound in service exports. We project GDP growth at 6.3 percent for FY25 and 6.5 percent for FY26,” the report indicates.
Macro stability is expected to remain within a comfortable range, granting policymakers the necessary flexibility.
“We are ahead of consensus regarding earnings. Importantly, India's relative earnings growth is on the rise, even when considering conservative consensus forecasts. Currently, valuations are the most attractive since the Covid pandemic,” the report noted.
“India's low beta nature makes it an ideal market for navigating the uncertain macro environment affecting equities. Notably, our sentiment indicator is in strong buy territory,” it added.
According to Morgan Stanley, this is likely to evolve into a stock pickers' market, contrasting with the macro-driven approach prevalent since the Covid pandemic.
“A positive shift in fundamentals is not yet reflected in prices – we expect India to recapture lost ground against its peers through the end of 2025,” the report highlighted.
The current quarter may yield positive surprises in earnings. Valuations remain attractive across various market segments. Financials have outperformed, and we anticipate this trend to continue. The consumer discretionary sector and select industrials may follow suit, as per the report.
