India’s equity market is in a bright spot despite ongoing corrections, and this may well be an ‘opportunistic time’ to invest in stocks, Morgan Stanley India managing director Ridham Desai said on Sunday.
Speaking at event, Desai said shifting consumption patterns, rising energy usage and increasing consumer borrowing will drive India’s growth in coming decades, which bodes well for the stock markets.
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Desai pointed out that in India’s income pyramid, a significant portion of the population remains at the bottom with very basic consumption levels. “But there’s a major transition happening in this pyramid,” he said, adding that the number of middle-class families will rise to 170 million in the next 10 years, from 70 million at present. The number of rich families, currently around 5 million, will grow to 25 million over the same period.
“By the way, 20 million households will move into the rich category. The world has never seen this happen in a 10-year time frame,” he said. Desai noted that these consumers will drive demand for high-end products such as iPhones, luxury cars and premium travel, which is why global companies are eager to establish their presence in India. “Apple has already experienced this over the last two years – all of Apple’s incremental revenue growth has come from just one country, and that’s India.”
According to Desai, higher energy consumption will be another factor driving India’s growth story. “Historically, we have been a very poor energy-consuming country. That’s changing now,” he said. India’s per capita daily energy consumption, currently at 850 watt, is expected to rise to 2,000 watt by the end of the next decade. “We need to invest significantly more in energy production, and there will be a number of applications created both upstream and downstream.”
Desai also highlighted a shift in borrowing trends, noting that younger Indians are increasingly living on “borrowed money”, which will fuel a lending boom. He pointed out that in the US, private debt is three times the GDP, while in China, it is 2.5 times the annual output. “Private debt in India is only about 75% of our GDP, but we will get there.”
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He also highlighted government and regulatory interventions that have strengthened India’s macro economy,
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