India Seen as a Haven Amid Global Economic Uncertainty

India Remains Relatively Stable Amid Global Uncertainty

Nimesh Shah, Managing Director of ICICI Prudential Asset Management Company, emphasized that India's economy remains stable despite global uncertainty. Geopolitical tensions, rising interest rates in the West, and technological disruptions are contributing to global uncertainty, but India's economic fundamentals remain strong.

Key Factors Contributing to Stability:

• Fiscal and current account deficits under control
• Healthier bank balance sheets
• Relatively low corporate leverage
• Domestic demand-driven economy, which provides insulation from global shocks
• Strong services exports, with limited manufacturing exports, reducing the impact of global tariff-related disruptions

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Market Valuations:

• Indian equities were expensive in 2024 but have improved over the past two years
• Corporate earnings have grown while markets have largely remained flat, bringing valuations closer to historical averages
• Valuations are now closer to global markets and historical ranges

Earnings Growth:

• Government policy support, including tax cuts, GST relief, and liquidity measures, is expected to play out over the next couple of years
• Earnings growth could strengthen in FY26 and FY27
• Rising consumption indicators, such as higher cement demand, stronger power consumption, and resilient auto sales, suggest a healthy domestic economy

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Long-term Outlook:

• Equity markets are likely to deliver similar returns as nominal GDP growth, which is around 10-11 percent
• Growing participation of domestic investors is reshaping market dynamics, with the mutual fund industry expanding from one crore investors in 2018 to nearly six crore today

Investment Advice:

• Disciplined, goal-based investing is recommended, rather than chasing recent performance trends
• Domestic institutional investors (DIIs) are now strong enough to withstand Foreign Institutional Investors (FIIs) exiting the market.