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India’s Nifty 50 and Sensex have hit all-time highs recently as the economy recovers from high inflation. While rates have peaked, investors are now taking stock of falling prices and long-term growth prospects. Market experts share their half-year India outlook.
India Economy
“At a global level, the real gross domestic product (GDP) growth forecast for this year has been lifted to 2.7%, from January’s 2.4% projection, supported by the recovery in China and India’s strong growth profile. Consequently, China is forecast to grow by 5.3% this year, with India expected to be the fastest growing major economy, hitting 6.2% for 2023,” as per Barclays Private Bank.
“The post-Covid recovery in India and Southeast Asia has been boosted by a substantial rise in investment as global companies seek to diversify their supply chains,” says Citi Bank.
“In the medium term, trends such as digitalization continue to support India’s economy, which is slated to grow 6.5% this year,” says Morgan Stanley.
“Against an uncertain global economic backdrop, India stands tall today with its sound and robust macroeconomic fundamentals. The economy has come a long way from the era of “taper tantrums,” when it was featured as one of the “fragile five” nations, to now being a flagbearer of resilience amid global turmoil. India’s markets and economy have seen multiple cycles and weathered more storms than they likely anticipated, some unprecedented,” says PineBridge Investments.
“India’s structural and fundamental story is pretty strong and stands out in the face of recent challenges globally, particularly considering the banking turmoil in the US and Europe, says Samir Sinha, Senior Analyst, Franklin Templeton Institute.
“As in many other countries, domestic inflation is easing. Unlike several peers in the advanced world, the headline consumer price index is likely to remain within the RBI’s tolerance band in 2023, even if it climbs towards the end of the year should food prices rise due to poor weather,” as per Barclays Private Bank.
India Equity
“With exposure typically skewed toward the largest and most liquid stocks, the niche players that most likely form the bedrock of India’s long-term economic prosperity seem to have been side-lined. As a result, many investors have missed the opportunity to allocate to India over recent years,” as per PineBridge. “It’s not too late to change this. To boost their local equity exposure, investors should look to selectively tap into those sectors with good long-term growth opportunities.”
“Since bottoming in March, Indian equities have rallied, but have still underperformed the broad EM universe. Growth, inflation, monetary policy, a reform-oriented government and a strong banking sector set the scene for optimism going forward,” adds Franklin Templeton’s Sinha.
“We expect improved equity performance in the second half of this year, supported by potential weakness in the US dollar, rising demand in the region and increasing direct foreign investment due to US-China strategic competition,” says Citi Bank.
“With much of the pent-up post-pandemic demand and restocking behind us, most of the margin recovery and input-price expansion, as well as returning pricing power for producers, seems to be factored into stock prices. With interest rates likely to remain high for longer than initially expected, and global growth slowing, the rest of this year might be one made for actively managed portfolios,” says Barclays.
