Who is Ridham Desai ?
Ridham Desai is a Managing Director of Morgan Stanley with 26 years at the firm. He heads Morgan Stanley’s Indian Equity Research team which is the top ranked team in the country. He has been consistently ranked among the best equity market strategist and analyst in the country over his career spanning over three decades
I came across a recently telecasted interview of Ridham and thought of drawing a summary of Ridham’s view for our clients. So here we go,
The biggest challenge currently is the growth slowdown that is happening and not the geopolitical or China-bound flows. The growth slowdown has emanated because of government spending not coming through. The current FY fiscal deficit is running at 3.4% of the budget and the target is 4.9%. Tracking Govt expenditure is critical since it is 12% of Indian GDP.
Ridham still believes in the structural bull market of India with 3-4-year perspective. As per him, the earnings upcycle is more than halfway mark – stocks earning cycle have another 3 odd years to go. What we are witnessing currently is a bull market correction. Ridham further makes the point that the SMID ( Small & Mid Caps) have gone frothy in some parts and are lined up for underperformance.
Global Factors to watch out for which would have an impact on Indian Markets
Quantum and timing of China’s pending stimulus if any- generally speaking, Chinese stimulus is good for the world so that China does not export its deflation to the rest of the world. In the case of India, 21% of our GDP is exports
Oil is another important factor for India. We have to be cognizant of any kind of oil shock if it comes along.
Back at home, things that would stimulate Indian Markets revolve around; How govt spending comes up, the shaping up of Direct tax reforms mentioned in the budget, GST rate adjustments if they come along would be the game changers, and continued Govt focus on infra execution.
Further, Ridham is very bullish if farm laws come through. There are 20 crore farmers in India and 40% of our workforce produces 15% of output. This is a very grave risk for the Indian economy. Any kind of transformation would be welcome in India.
The current central bank policy stance in India is Neutral and Morgan Stanley expects a rate cut in Feb 2025. If a rate cut comes in early, that would be positive for markets with limited impact.
Additionally, the New CPi basket will come out in the next few months where food will have lower weight in CPI data resulting in lower volatility in CPI; with lower CPI- lower volatility of growth- and it can cause PE re-rating because of it.
On India’s massive outflows of FIIs, Current valuations are not digestible to FIIs on a relative basis and hence time or price correction will take care of it. Ridham is of the view that DII participation will only increase in times to come.
Private equity and venture capital money is lined up on a very big scale to come through 3-5 years. and he is expecting a balance of payment surplus in the foreseeable future.
On Current State of Indian Markets-
# It is a stock pickers market now. It is no longer about Index- it is about pockets which are good.
# Large Pvt Banks are the sweet spot for the next 24 months to 36 months.
# In Consumption- the luxury segment will see a strong revival.
# Ridham is expecting Rural recovery to come through.
# He is wary about sectors where competition intensity is going up. Especially in digital platform business.
# Cautious on Industrials- Defence, Railways. Price is still demanding
# IT services are no problem. AI is looking promising across sectors.
# Cement is in the sweet spot and expecting bumper profits 6-12 months down the line.
Hope, you added a perspective from the views published above.
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