Morgan Stanley projects India’s GDP growth at 6.3% for 2024-25 (FY25) and 6.5% for 2025-26 (FY26), with inflation expected to remain moderate at just above 4%. They also expect two rate cuts by the Reserve Bank of India (RBI) this year.
“Then we get this kind of compounding of earnings at 15-20% per annum in rupee, which is way above earnings growth everywhere else. And as that happens, India will continue to rise in the EM index. And at the margin, we’re going to get a different type of investor in India, the truly global investor, rather than just the dedicated EM investor,” Garner noted.
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Foreign investors will remain engaged in India this year, as he believes the recent sell-off by foreign institutional investors (FIIs) is ‘actually a problem of success’ after significant outperformance over the past few years rather than any underlying concerns.
“India’s share in global equities is about 2% now; once it gets to 3-4%, it becomes impossible for global investors to ignore,” he said.
Morgan Stanley remains bullish on India, with a Sensex target of 93,000, implying a 15-18% upside from current levels. However, Garner cautioned that downside risks could emerge if global markets, particularly the US, enter a bear phase. “In a scenario like a US recession or an S&P 500 bear market, you could see a 10% or larger decline in Indian equities,” he said.
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While India is in a cyclical slowdown, the country also has plenty of firepower on the monetary and fiscal side to lean into the cyclical slowdown. “So, it’s not something to be concerned about,” he said.
First Published: Jan 15, 2025 11:33 AM IST
