Macquarie continues to maintain an Overweight rating on India, highlighting its position as the most attractive secular emerging market (EM) investment opportunity. The report emphasizes the country’s strong nominal GDP growth and geopolitical advantages while noting some challenges that need to be addressed.
Key Highlights:
- Robust GDP growth: Macquarie expects India’s nominal GDP to stabilize at 9%-10% growth, which is at least double that of China’s.
- EPS estimates misaligned: Despite strong GDP growth, EPS estimates of 18%-19% for FY25 are seen as overestimated by 300-500 basis points.
- Surprising resilience: India’s market underperformance in Q4CY24 was limited to ~3%, showcasing resilience amid global uncertainties.
- Labor and domestic market strengths: India is one of the few EMs capable of adding labor, supported by its large domestic market and low trade dependency.
- Geopolitical positioning: The country offers a wide spectrum of investable assets and enjoys a superb geopolitical position.
Challenges Identified:
- Labor force quality: The quality and productivity of India’s labor force remain areas of concern.
- Domestic productivity: Addressing domestic productivity issues will be key to realizing India’s full economic potential.
Macquarie’s bullish stance on India underlines the nation’s ability to stand out in the global EM landscape, despite challenges in aligning EPS growth with economic expansion.
Disclaimer: This content is for informational purposes only. Please consult a financial advisor before making investment decisions.
