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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
I recently visited India for two weeks and was struck by how much has changed, predominantly for the better, in terms of its macroeconomic picture. With that in mind, here are my latest thoughts on the macro environment, along with my high-level take on India’s equity market.
On Indian equities, I think the catalysts of cleaner company balance sheets and strengthening business and consumer demand augur well for both nominal gross domestic product (GDP) and corporate earnings growth. I see India’s economy as being in much better shape structurally than it was pre-pandemic and expect GDP growth of around 7% for full-year 2022, followed by annual growth in the neighborhood of 6% – 7% over the next few years. Rising interest rates are a potential headwind, but I suspect the Reserve Bank of India will be unlikely to hike rates too aggressively for fear of dampening demand and growth.
Bottom line: While overall market valuation has been quite elevated lately, I continue to believe discerning investors should look for opportunities to “buy the dips” in India’s equity market going forward. While not my base, the biggest risk to my view is a large and sustained upward move in commodity prices, which could adversely affect India’s current and fiscal accounts and push broader inflation even higher.