Interviewee: Ridham Desai, Head of India Equity Research & Equity Strategist at Morgan Stanley
Interviewer: ET Now
Subject: India Growth Story, Key Themes & Stocks On Radar
Date: 21 November 2024
From India’s perspective, there are 3 imponderables:
- What happens to global growth next year, which will depend on how the new US president frames his policies.
- What happens to India’s growth – there’s a lot of skepticism following the slowdown that we’ve witnessed over the last 6 months.
- Foreign portfolio investors are selling Indian equities; what is the demand for Indian equities (valuation being one of the aspects).
Global trade: The relative trade favors India; the absolute trade depends on the tariffs levied. Global growth will slow down a bit next year, but not materially. It will be offsetted by the expected Fed rate cuts. India is in a good place. But if the policy rollout is more restrictive, then we will face challenges in the second half of the next year.
India’s growth: The soft patch of growth was temporary due to a number of factors – elections, incessant rains, etc. The government has spent Rs 3 lakh crores on the economy, which will show its positive impact; farm incomes are looking good; this year, we have a longer wedding season. The quarter ending December 2024 is going to be very strong. Liquidity in the system is more or less in surplus which augurs well for growth prospects.
Foreign portfolio investors’ selling: It wasn’t an India specific sale, but affected emerging markets. China’s outflows exceeded that of India. The US dollar was pricing in President Trump’s victory and it was rallying through the month of October. We got a healthy correction and are probably at the end of that correction.
Responses to interviewers’ questions:
- Both domestic and foreign investors cannot be buying at the same time. It’s preferable if foreign investors are selling than domestic investors.
- Indian government will no longer have a fiscal deficit in 3 years; this will give corporates room to borrow. This will result in a big capex cycle, which in turn, will result in India’s growth cycle.
- Government spending will continue to focus on infrastructure.
- Government has scope to reduce taxes (GST). If that happens, it will result in higher consumption.
- The implications of AI are still unfolding and we need to see how things unfold going forward.
- High quality IPOs are expected to hit the market.
Investment recommendations:
- Private sector banks – undervalued. Also, credit will reach the hinterlands of the country and replace moneylenders. Large banks with good deposits and risk controls become attractive.
- Discretionary consumption (rural economy has mended) – but here, some companies are facing stiff competition, so investors need to assess which companies have a strong moat, which makes them investment worthy. Discretionary consumption is expected to grow faster than staple consumption. New areas in discretionary consumption (quick commerce, leisure, travel, etc.) are expected to grow faster than soaps and staple stuff.
- Industrial stocks.
- IT: Over the next 3-4 years, IT services will likely experience a boom due to AI.
- Cement: Cement stocks look attractive over the next 12 months.
To access the interview, click here.
Disclaimer: The key points of the interview presented here are not a substitute to listening to the full interview. To get the interviewee’s holistic message requires listening to the entire interview.
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