“A favourable macro backdrop and a Fed close to cutting its policy rates are positive factors for emerging market assets.”
- Indian markets have delivered strong gains this year on expectations of strong economic growth and demand.
- We think the country should continue to benefit from prudent fiscal and monetary policies, and stable inflation.
- In general, the global backdrop remains constructive for attractively-priced emerging market assets.
Since the start of the year, Indian stocks have outperformed the overall emerging markets and global indexes due to optimism around strong economic growth and robust domestic demand. While in the short term, equity markets may take a pause, India continues to be a long-term story of structural growth led by favourable demographics, a growing middle class, and stable policy making. The recent annual budget confirms this direction with a prudent allocation of resources towards inclusive growth. The government is likely to focus on boosting infrastructure, employment generation, upskilling of the population, and social security. Additionally, India stands to benefit from the global reallocation of supply chains. Indian bonds also offer potential opportunities, given the contained inflation and their recent inclusion in global benchmarks.
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