Episode summary
India’s Next Market Phase
Thoughts on the Market (Morgan Stanley)
· · Guests: Chetan Ahya, Ridham Desai
Summary
India is still attracting bullish domestic investors, but foreign investors remain cautious, and that split framed the discussion after Morgan Stanley’s India Investment Forum in Mumbai. The host and a guest said local investors were actively looking for the next opportunity, while global investors were more selective as India’s relative growth edge narrowed versus other major markets.
On the macro side, the guest pointed to strong underlying momentum, citing bank credit growth at 17.7% year-on-year and passenger vehicle sales up 27% in May. Even so, India’s 13% earnings growth looked less compelling beside Korea, Taiwan, Japan and the US, which made it harder for international investors to justify rotating into India in the near term. The guest argued India’s valuation is now at its lowest relative multiple in decades, which could matter more to long-term investors than short-term flow trends.
Policy support was a major theme. The host and guest said recent measures to remove withholding tax on debt investors and encourage dollar borrowing should help debt inflows and support the currency, though equity flows will likely depend on a better relative-growth backdrop or a new IPO cycle. They also highlighted a capex super cycle in AI, energy, defense and industrial onshoring, with financials, industrials, consumer names and possibly IT services seen as the main opportunities.
Key takeaways
- The host said domestic investors remain bullish on India, while foreign investors are still more cautious.
- The guest said India’s bank credit growth at 17.7% year-on-year and passenger vehicle sales growth of 27% show underlying macro strength.
- The guest said India’s relative growth advantage has narrowed versus Korea, Taiwan, Japan and the US, making equity flows harder to win.
- The guest said recent tax and currency-related policy changes should boost debt inflows over the next 12 months.
- The guest and host highlighted financials, industrials and consumer stocks as the clearest opportunities, with IT services as a possible dark horse.
Notable quotes
“Domestic investors look that they are bullish and foreign investors continue to stay rather cautious on the Indian markets”
“bank credit growth is growing as of the last bi-weekly data point that we got, it's growing at 17.7% year-on-year”
“India is reporting 13% growth, it's becoming a challenge for investors to look for opportunities in India relative to other markets”
“The removal of taxation on debt investors will make a difference”
“financials, industrials, and consumption, not necessarily in that particular order, are probably the best places for investors to look at”
How the episode opens
Welcome to Thoughts on the Market. I'm Chetan Ahya, Morgan Stanley's Chief Asia Economist. — And I'm Ridham Desai, Morgan Stanley's Head of India Research and Chief India Equity Strategist. — Today, the biggest takeaways from our India Investment Forum in Mumbai. From the shifting outlook for India's markets and flows to the sectors driving the next phase of corporate earnings and capex. It's Friday, June 12th at 7:00 p.m. in Hong Kong.
And 4:30 p.m. in Mumbai. — Ridham, Morgan Stanley's India Investment Forum took place in Mumbai last week and I was there with you. These events are a great opportunity to speak with investors who come across from the globe to attend. Now that we have had a few days to process the conversations, what stood out to you? What was the biggest shift in investor sentiment that you picked on?
So, Chetan, I think it's been the case of a continuing story about India. Domestic investors look that they are bullish and foreign investors continue to stay rather cautious on the Indian markets. We could see that in the overall attendance.
In contrast, I think domestic investors were looking for the next stock that they wanted to buy. They were seeking opportunities and there was a lot of interest in meeting companies. Before we get into markets, let me turn back to you from a macro side.
India's growth story remains strong, but relative growth appears to be cooling. This is in contrast to markets like Japan, Taiwan, Korea, and the US. How should investors think about India's macro positioning in that context?
So, Ridham, when I look at the macro data in India, they're all indicating a meaningful upside in the growth trend. So, I'll just cite two key cyclically sensitive macro data points.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- india macro outlook
- capital flows
- sector opportunities
- india equity strategy
- next market phase
Watch the episode
Watch “India’s Next Market Phase” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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