India’s Next Market Phase

Summary

Morgan Stanley’s Chetan Ahya and Ridham Desai discuss India’s macro outlook, capital flows, and sector opportunities after their Mumbai investment forum. They highlight strong domestic growth, a capex super cycle, and policy measures to attract debt inflows, while acknowledging near-term relative growth headwinds versus other Asian markets. Ridham Desai sees a compelling long-term entry in Indian equities and identifies financials, industrials, consumer, and IT services as key areas to watch or own.

• Domestic investors remain bullish on India while foreign investors are cautious, creating a sentiment gap.
• India’s bank credit growth (17.7%) and auto sales (27% in May) signal strong macro momentum, but relative earnings growth lags Korea, Taiwan, Japan, and the US.
• Indian equities trade at the lowest relative multiple in 35 years, offering a long-term opportunity as terminal growth stays superior.
• Policy measures removing withholding tax on debt investors and easing hedging should significantly boost foreign debt inflows.
• A broad capex super cycle in AI infrastructure, energy, defense, and onshoring supports India’s industrial and financial sectors.
• The Indian consumer sector is structurally unbeatable, driven by 1.5 billion people and 10-15% nominal consumption growth.
• Indian IT services are a potential dark horse; currently disrupted by AI but may become highly interesting once the dust settles.