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Informist, Tuesday, Jan. 28, 2025

 

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--BlackRock: Neutral on emerging markets, growth and earnings look mixed 
--CONTEXT: BlackRock Investment Institute details India econ, market outlook 
--BlackRock: Valuations for India and Taiwan are looking high 
--BlackRock: Believe Indian equities are not materially expensive 
--BlackRock: Expect Indian corporate earnings to remain strong over long run 
--BlackRock: Remain tactically neutral on Indian equities 
--BlackRock: Addition to India's working population bucking global trend 
--BlackRock:Advocate above-benchmark allocation to Indian equities for 5 yrs 
--BlackRock: See macroecon policy becoming more disruptive, not stabilising 
--BlackRock: Remain pro-risk, upgrade US stocks on corporate strength 
--BlackRock: See opportunity in Indian large-caps given recent correction 
--BlackRock:Still expect double-digit return from Indian large-caps in 5 yrs 
--BlackRock: Downside risk for Indian mkt if Budget disappoints on stimulus 
--BlackRock: India's economy currently faces cyclical, near-term issues 

 

By Anand JC and Anshul Choudhary 

 

MUMBAI – India will continue to be BlackRock Investment Institute's preferred pick in the long-term despite near-term cyclical pressures to the economy, said Vivek Paul, head of portfolio research at the firm. International investors should prefer Indian large-caps as it may deliver 11-12% returns per annum on a five-year investment horizon, Paul told Informist.

 

Among emerging markets, the firm currently doesn't have a pick in the near term. However, in the long term, India remains an outlier among its emerging market peers, Paul said.

 

Currently, corporate strength-led growth is making the US the only preferred pick globally, Paul added. Yet, he said that investors remain wary of potential policy measures that could test the US' strength and are currently in a wait-and-watch mode over US President Donald Trump's policies.

 

Paul said India is currently undergoing a slowdown which he considers cyclical, and not structural in nature. Going forward, he expects lower interest rates to increase liquidity in the system, which may aid growth in the Indian economy. The firm expects policy interest rates in India to settle around 5% in 2025, compared to the current 6.5%.

 

BlackRock feels India's long-term outlook is bright and underpinned by structural shifts. It said the country is navigating a transformation, not a business cycle. "In India, this suggests being cautious of applying purely cyclical lens to incoming economic data which could lead to underestimating long-term opportunities," it said in a statement. However, in the near term, BlackRock expects subdued domestic sentiment and uncertainty over the policies of newly-elected US President Donald Trump, which could affect markets.

 

Factoring in these risks, BlackRock has a neutral stance on Indian equities in the short-term. "...(we) advocate for above-benchmark allocations to Indian equities within strategic portfolios with investment horizon of five years...," it said.

 

On emerging markets, the firm is currently neutral for the next 6–12 months as the growth and earnings outlook for this region looks mixed. It flagged high valuations in India and Taiwan. 

 

Its India-growth outlook for the long term is based on a "favourable confluence of mega forces" with higher potential long-term equity returns compared to other regions. BlackRock feels India's valuations, while currently high, are not materially expensive. 

 

"We think India's relatively strong growth outlook could help explain a P/E ratio above historical averages," BlackRock said. It expects corporate earnings to remain strong over the long run. In the near term, Paul said the Indian market could face a downside risk if the upcoming Union Budget disappoints in terms of stimulus measures. 

 

It noted that India is bucking the global trend when it comes to the working age population. In the next 20 years, India may see an increase in the working-age population, while most other major countries, including China, will see a decline. 

 

Paul warned that in the coming years, he sees global macroeconomic policies playing a more disruptive role, rather than a stabilising one, as has been the case in the past. For this reason, he expects inflation and interest rates to remain on the higher side. BlackRock has called for investors to remain pro-risk, and has upgraded US stocks on corporate strength.  End

 

Edited by Akul Nishant Akhoury and Avishek Dutta

 

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