Investing.com – Morgan Stanley analysts predict that Indian stocks will continue to rise in the coming years, especially in light of the 2024 general election results, in which the National Democratic Alliance (NDA), led by the BJP, is expected to win a third term in power.
Although the NDA only won a small majority, Morgan Stanley believes that its retention of a majority still means a predictable policy outlook and signals macroeconomic stability and improved overall economic conditions in India.
Based on this, the company predicts that the annual growth rate of the Mumbai Sensex 30 index will be between 12% and 15% over the next five years.
India’s Nifty 50 index and Sensex index plunged from their record highs earlier this week as the election results showed that the NDA won a majority of seats far less than expected, while the Congress-led Indian alliance made some progress, raising some concerns that the NDA may face more resistance in pushing through comprehensive policy reforms.
However, the NDA is still expected to form a third consecutive government, and incumbent Prime Minister Narendra Modi will continue to serve as prime minister.
Subsequently, Indian stocks rebounded sharply in the past two days, returning to the peak level at the beginning of this week.
Investors generally welcomed Modi’s business-friendly policies formulated in the past 10 years, and India’s economic growth surpassed global competitors as the government increased investment in infrastructure construction and manufacturing capacity.
Morgan Stanley said that this trend is likely to continue in the next five years, and more economic reforms implemented by the BJP will enhance India’s economic stability.
The company said it would increase its holdings in financial, technology, non-essential consumer goods and industrial stocks and reduce its holdings in other sectors. At the same time, Morgan Stanley prefers cyclical stocks to defensive stocks, and large-cap stocks to small-cap stocks.
However, Morgan Stanley also pointed out some risks facing the Indian stock market, including bureaucracy and lagging infrastructure, the potential impact of artificial intelligence on India’s technology industry, climate change, and slow reform progress.