In a recent report, Moody’s, an international rating agency, has predicted that the third term of Prime Minister Narendra Modi, ending in 2029, will be India’s decade due to the policy predictability of the BJP-led New Democratic Alliance. The report states that the NDA’s re-election will result in further structural reforms that will lead to macro stability and rising GDP growth. Moody’s has revised India’s GDP upwards to 6.8 per cent for 2024-25, with expectations of increased earnings growth and outperformance in equities.
India is expected to drive a fifth of global growth in the next decade, driven by manufacturing, energy transition, and advanced digital infrastructure. The stock market has been making new highs, with potential for further growth due to expected policy changes under the government’s mandate. The report highlights key policy reforms of the past decade and anticipates more positive structural shifts under Modi 3.0 over the next five years, supported by the Reserve Bank of India’s commitment to macro stability.
There are various opportunities in sectors such as consumer, energy, financials, industrials, and services in India, but the report also notes risks such as capacity constraints in key areas, geopolitics, AI effects on the tech industry, and climate change. Investors expect actions from the government, including a possible infrastructure spending increase, rationalization of GST rates, and reforms in farm, land, and labor sectors. The government’s announcement of 3 crore new housing units under PMAY is a positive step.
Moody’s suggests that India is halfway through the cycle, with the potential for earnings to compound at 20 per cent annually over the next 4-5 years. The report predicts a strong equity bull market in India, with expected compound annual returns of 12-15 per cent over the next five years. However, caution is advised against a substantial global growth slowdown, which could impact India’s growth and funding. Overall, Moody’s believes that this will be India’s longest and strongest bull market ever, urging investors to stay invested.
