Current Economic Slowdown Cyclical, Says BlackRock

Despite the ongoing economic slowdown, India's growth prospects remain strong over a longer term, according to multinational investment firm BlackRock.

India's demographic advantage, digitisation and resilience in navigating a fragmented geopolitical landscape are expected to drive structural shifts. "These forces bolster India's long term growth prospects, underpinning our case for above-benchmark allocations to Indian equities in strategic portfolios with horizons of five years and above," BlackRock stated in its global outlook.

India’s infrastructure demands are set to remain elevated, partly driven by the expansion of data centres and energy systems to support AI adoption. The digital payments revolution has enabled giant strides toward financial inclusion, stated the report. "India’s growth outlook over the long-term, helped by a favourable confluence of factors, supports expectation of higher potential long-term equity returns in India, compared to other regions," Vivek Paul, head of portfolio research at the BlackRock investment institute said.

India’s relatively strong growth outlook could help explain a P/E ratio above historical averages, the report stated. "We expect corporate earnings to remain strong over the long run, supported by a robust growth backdrop, with policy interest rates likely settling around 5%, down from the current 6.5%," it added. "We find our estimate of India’s Equity Risk Premium – around 4.9 – to be broadly in line with historical average, suggesting valuations aren’t as stretched as they may appear on traditional metrics," it added.