Even as we come to the end of calendar year 2017, in what has been an excellent year for the equity markets with the Sensex returning more than 24% in the year so far, Jonathan Garner of Morgan Stanley says that he see better earnings growth acceleration in 2018. “The Indian markets have been different from other emerging markets. Growth has been quite choppy in India in the past 12 months. We should see earings grow at 12% year on year, as the impact of GST and demonetisation is behind us,” Jonathan Garner, Chief Asia & EM Equity Strategist at Morgan Stanley told CNBC TV18.
After India Inc posted better than expected returns in the second quarter, Abhimanyu Sofat of IIFL said that the earnings momentum is likely to be better in the coming quarters. “After a long time, we are going to hit double digit earnings growth. We look quite optimistic about the future in terms of earning momentum where the consumer cycle also improves with the shift from the unorganised to organised as well,” Abhimanyu Sofat ,VP- Research, IIFL told ET Now in a recent interview.
Jonathan Garner also reiterated Morgan Stanley’s December 2018 Sensex target to be 35.700. The expert also observed that mutual fund inflows inflows have been a unique feature to the Indian markets. “India is one of our preferred markets along with China and Brazil in 2018. The country has outperformed very nicely this year. The Indian markets has been consistently supported by strong mutual fund inflows. So it’s really the earnings growth acceleration and strong mutual fund inflows,” he told the channel.
The emerging markets veteran also lauded the government’s structural reforms agenda. “What we are seeing India is probably uniquely amongst emerging markets (EM). It has a very clear reform agenda to address long standing issues particularly around infrastructure spending. We have also seen, I have been waiting for it for 20 years, the implementation of the goods and services tax (GST) this year. We have seen the recapitalisation of the PSU banks,” he told CNBC TV18 in November this year.
A recent Morgan Stanley report says that India is likely to be the world’s fastest-growing large economy in the next 10 years, driven by digitisation, favourable demographics, globalisation and reforms. According to the global financial services major, the trend line in India’s annual GDP growth has been accelerating to 6.9 per cent in 2000s, from 5.8 per cent in the 1990s, and this momentum is likely to continue in the next decade as well.
Morgan Stanley expects digitisation will provide a boost of 50-75 bps to GDP growth and forecast that India will grow to a $6-trillion economy and achieve upper-middle income status by 2026-27. “We think India’s stock market could be among the world’s best performers in the next 10 years, leading to India’s market cap rising from around $2 trillion to around $6 trillion,” the report stated.