New Delhi [India], In a recent report, international rating agency Moody's has claimed that Prime Minister Narendra Modi's third term, which will end in 2029, will be India's decade. The rating agency's report said that the most important aspect of the BJP-led New Democratic Alliance (NDA) retaining its majority is its policy forecast.
“The main benefit to the market of the NDA's re-election is the policy forecast, which will impact growth and equity returns over the coming five years. We believe the government will remain focused on macro stability (ie, inflation pick-up) ) to inform policy,” the report said.The report further said that the market expects more structural reforms in the coming days. “Now with the government's continuity, we believe the market can expect further structural reforms, which should help us earn "There will be more confidence in the cycle. Macro stability coupled with rising GDP growth relative to real rates should drive India's outperformance on emerging markets (EM) equities."
Earlier, the rating agency had revised India's GDP growth for 2024-25 to 6.8 per cent, while the headline CPI declined to around 4.5 per cent for the year. At present the inflation rate is 4.75 percent.
The report said companies will outperform with earnings growth forecast to 2025-26 being 500 basis points higher than consensus.“Our 12-month forward BSE Sensex target is 82,000, indicating an upside of 14 per cent.”
One-fifth of global growth in the coming decade is likely to be driven by India. This will be underpinned by increased offshoring of both services and goods, thereby boosting the manufacturing sector, as well as promoting the energy transition and the country's advanced digital infrastructure.
“India's stock market is making new highs, and now the debate is on how to move the market materially higher. In our view, the government order is likely to result in policy changes that will impact the earnings cycle. will lengthen and surprise the market.According to the report, the policy reforms of the last decade include flexible inflation targeting, GST law, allowing retirement funds to invest in shares, the bankruptcy code, RERA and lower corporate tax rates as well as various social reforms. Reforms and infrastructure have changed the structure of the economy for the better. There will be much more positive structural change in the next five years when Modi 3.0 comes to power.
The Reserve Bank of India (RBI) complements the government's efforts and is committed to macro stability through flexible inflation targeting, which has suppressed inflation volatility and narrowed interest rate differentials with the world.
The report further said that there are ample opportunities in India across multiple sectors such as consumer, energy, financial, industrial and services sectors.But the report also cautions on various risks. "There are too many risks for India's equity market to negotiate, even with the elections behind it. The country lacks capacity in bureaucracy, judiciary, healthcare, education and skills training. While other risks include geopolitics, the impact of AI, low productivity in the agricultural sector, climate change and lack of adequate factor reforms, the report said.
The Moody's report also talks about various actions that investors expect from the government, including the upcoming Budget in July.Potential infrastructure spending increases could reduce logistics costs, boosting select manufacturing sectors such as defence, electronics, aerospace, food processing, renewable energy and large-scale housing.
In its first cabinet meeting soon after assuming power, the government announced the creation of 3 crore new housing units under the Pradhan Mantri Awas Yojana (PMAY). Investors also expect the government to rationalize GST rates, the report said. GST rates should be reduced in key sectors like cement, hybrid vehicles and two-wheelers.
Agriculture, land and labor reforms are the need of the hour, but the chances of the coalition government taking a decision on these are less.Markets are also looking at rationalization of capital gains taxes, with short-term capital gains taxes likely to increase, but not long-term.
With more free trade agreements and expansion of rupee-based trade, India's role in the global economy will expand. Boosting household savings in equity through higher limits on equity for retirement funds will help income growth. “India is almost halfway through the cycle and earnings will grow by 20% annually over the next 4-5 years,” the report said. The equity bull market is making significant progress in terms of returns and longevity.We expect the Sensex to deliver 12% returns and -15% compound annual returns over the next five years."
"We believe this will be India's longest and strongest bull market ever. Stay invested," Moody's says, though cautioning that a sharp slowdown in global growth could hamper India's growth. It can also harm funding.
“The main benefit to the market of the NDA's re-election is the policy forecast, which will impact growth and equity returns over the coming five years. We believe the government will remain focused on macro stability (ie, inflation pick-up) ) to inform policy,” the report said.The report further said that the market expects more structural reforms in the coming days. “Now with the government's continuity, we believe the market can expect further structural reforms, which should help us earn "There will be more confidence in the cycle. Macro stability coupled with rising GDP growth relative to real rates should drive India's outperformance on emerging markets (EM) equities."
Earlier, the rating agency had revised India's GDP growth for 2024-25 to 6.8 per cent, while the headline CPI declined to around 4.5 per cent for the year. At present the inflation rate is 4.75 percent.
The report said companies will outperform with earnings growth forecast to 2025-26 being 500 basis points higher than consensus.“Our 12-month forward BSE Sensex target is 82,000, indicating an upside of 14 per cent.”
One-fifth of global growth in the coming decade is likely to be driven by India. This will be underpinned by increased offshoring of both services and goods, thereby boosting the manufacturing sector, as well as promoting the energy transition and the country's advanced digital infrastructure.
“India's stock market is making new highs, and now the debate is on how to move the market materially higher. In our view, the government order is likely to result in policy changes that will impact the earnings cycle. will lengthen and surprise the market.According to the report, the policy reforms of the last decade include flexible inflation targeting, GST law, allowing retirement funds to invest in shares, the bankruptcy code, RERA and lower corporate tax rates as well as various social reforms. Reforms and infrastructure have changed the structure of the economy for the better. There will be much more positive structural change in the next five years when Modi 3.0 comes to power.
The Reserve Bank of India (RBI) complements the government's efforts and is committed to macro stability through flexible inflation targeting, which has suppressed inflation volatility and narrowed interest rate differentials with the world.
The report further said that there are ample opportunities in India across multiple sectors such as consumer, energy, financial, industrial and services sectors.But the report also cautions on various risks. "There are too many risks for India's equity market to negotiate, even with the elections behind it. The country lacks capacity in bureaucracy, judiciary, healthcare, education and skills training. While other risks include geopolitics, the impact of AI, low productivity in the agricultural sector, climate change and lack of adequate factor reforms, the report said.
The Moody's report also talks about various actions that investors expect from the government, including the upcoming Budget in July.Potential infrastructure spending increases could reduce logistics costs, boosting select manufacturing sectors such as defence, electronics, aerospace, food processing, renewable energy and large-scale housing.
In its first cabinet meeting soon after assuming power, the government announced the creation of 3 crore new housing units under the Pradhan Mantri Awas Yojana (PMAY). Investors also expect the government to rationalize GST rates, the report said. GST rates should be reduced in key sectors like cement, hybrid vehicles and two-wheelers.
Agriculture, land and labor reforms are the need of the hour, but the chances of the coalition government taking a decision on these are less.Markets are also looking at rationalization of capital gains taxes, with short-term capital gains taxes likely to increase, but not long-term.
With more free trade agreements and expansion of rupee-based trade, India's role in the global economy will expand. Boosting household savings in equity through higher limits on equity for retirement funds will help income growth. “India is almost halfway through the cycle and earnings will grow by 20% annually over the next 4-5 years,” the report said. The equity bull market is making significant progress in terms of returns and longevity.We expect the Sensex to deliver 12% returns and -15% compound annual returns over the next five years."
"We believe this will be India's longest and strongest bull market ever. Stay invested," Moody's says, though cautioning that a sharp slowdown in global growth could hamper India's growth. It can also harm funding.
