Morgan Stanley predicts $6.5-trillion boom in India’s stock market by 2030

Morgan Stanley is betting on India’s stock market, nearly trebling its market capitalisation to $10 trillion by the end of the ongoing decade, driven by strong economic growth.

“India has the conditions in place for an economic boom fuelled by offshoring, investment in manufacturing, energy transition, and advanced digital infrastructure,” the brokerage firm said in a note led by India equity strategist Riddham Desai on November 1.

Morgan Stanley believes that the Indian economy will become the third-largest in the world by the end of the decade and will drive nearly 20 percent of the world’s growth as it sees current global trends benefiting the local economy.

The growth in India will be led by offshoring of manufacturing services as the country positions itself as the factory of the world, increasing digitalisation of the economy led by IndiaStack and energy transition buttressed by India’s commitment to the Paris Accord of 2015, Morgan Stanley said.

“India is reorienting its growth model towards encouraging investment and leveraging exports – taking it closer to the East Asian growth model, which has proved successful for many economies in lifting per capita incomes,” Morgan Stanley said.

The brokerage firm is of the view that the increase in economic growth will also trigger a boom in consumption with households having annual incomes of more than $35,000 rising five-fold to 25 million by the end of 2030.

Morgan Stanley expects the rise in income levels to push India’s GDP to over $7.5 trillion by 2031 and trigger a boom in discretionary consumption. The brokerage firm is expecting per capita income of the country to more than double to $5,242 by 2031.

Morgan Stanley sees financial services, automobile and auto ancillary, healthcare services, industrials, real estate and exporters as the key investment theme for investors over the next decade.

The brokerage believes that spike in global commodity prices because of geopolitical uncertainties, supply-side disruptions affecting volume and price and political instability, coupled with tight monetary and fiscal policy could hurt India’s growth.

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