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'India is arguably at start of a long wave boom': 10 things Morgan Stanley said about India

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Apr 9, 2023
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Global brokerage Morgan Stanley has upgraded India to overweight rating. The brokerage in its report said that India has advanced from sixth to first place in its process, with relative valuations less severe than in October, and as foreign direct investment (FDI) and portfolio flows are being supported by multipolar world trends, India is adding a reform and macro-stability agenda that supports a positive outlook for capital expenditure (capex) and profits.

"We see a secular trend toward sustained superior USD EPS (Earnings per share) growth versus emerging market over the cycle, with a young demographic profile supporting equity inflows," said the brokerage in its report.

Lets take a look at 10 key things Morgan Stanley said about India in its report;
1. India is arguably at the start of a long wave boom at the same time that China may be concluding one, with a GDP per capita of just US$2.5k (vs. US$12.7k for China) and favourable demographic trends.

2. In contrast to China's abrupt decline, India's manufacturing and services PMIs have steadily increased since COVID restrictions were lifted.

3. India's construction and real estate transaction volumes have risen sharply

4. An important advantage for India is its capacity to take advantage of multipolar world dynamics. Along with the US, Australia, and Japan, it is a member of the Quad political framework.

5.India has benefited from a spike in foreign direct investment (FDI), notably from companies in the US, Taiwan, and Japan that are targeting the country's sizable domestic market. India is also benefiting from a significantly improved export infrastructure condition with respect to more effective ports, roads, and electrical supply.

6. At the same time as private equity firms are having difficulty with exits in China, they are growing in India (and ASEAN)

7. In contrast to China, where the population of working age has been declining since the beginning of the previous decade, India is seeing a favourable demographic trend.

8. When comparing Indian and Chinese equities in USD terms and using the MSCI Indices as the benchmark, a new era of Indian outperformance vs Chinese performance appears to be coming.

9. China and India's two markets have very similar performance patterns from 2003 to 2020, outperforming MSCI EM on average. However, India has dramatically broken out to the upside since the beginning of 2021, outperforming China by a factor of almost 100%

10. Morgan Stanley also said there are things that have fundamentally changed in India, including structural reforms, supply-side reforms like corporate tax cuts and production-linked incentive (PLI) schemes, and regulation and formalisation of the economy.

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India's services growth at 13-year high in July on strong demand

Reuters | Aug 3, 2023, 10.54 AM IST
Printed from
BENGALURU: India's dominant services sector expanded at its fastest pace in 13 years last month as demand increased
significantly despite elevated inflationary pressures, a business survey showed on Thursday.
S&P Global's India services purchasing managers' index rose to 62.3 in July from June's 58.5, confounding expectations
in a
Reuters poll for a dip to 58.0. It was the highest index reading
since June 2010 and has remained above the 50-mark that
separates growth from expansion for two years.
"The resilience of the service sector underscores its vital role in
fuelling India's economy, with the PMI results for July so far pointing to a notable contribution from the sector to
overall GDP for the second fiscal quarter," noted Pollyanna De Lima, economics associate director at S&P Global
Market Intelligence.
India's economy is expected to grow 6.2% in the July-September quarter, according to the latest Reuters survey.
Overall demand remained strong. While the new business sub-index showed demand had risen since August
2021, the pace of growth was the highest since June 2010.
International demand also gathered steam, rising significantly in July and was the second-strongest since the
series started in September 2014.

Inflation in India rose to 4.81% in June, due to surging vegetables prices. Though within the Reserve Bank of
India's (RBI) 2%-6% target range, the central bank was not expected to cut rates anytime soon.
Operating costs rose at the fastest pace since June 2022 and firms passed on some of that burden to customers,
albeit at the slowest pace in three months as they were cautious about their pricing strategies.
"Looking at PMI price indices in recent months, it seems that competitive advantage continued to support
demand for Indian services, with increases in output prices here modest relative to several other nations," added
De Lima.

Although the future activity sub-index, which measures optimism, slipped from June's six-month high over
concerns surrounding extreme weather, the year-ahead outlook remained strong.
Firms continued to add headcount, stretching the current sequence of hiring to more than a year. However, little changed
from June the rate of hiring remained weak.
A manufacturing sector PMI released on Monday dipped to 57.7 in July but strong services activity meant the
overall S&P Global India Composite PMI Output Index rose to a 13-year high of 61.9.

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