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The Next India — From a Cyclical Downturn to a Standard Upturn

18 May

The hottest stock market in the world lately has been India’s.

As you can see, there’s been a gigantic rally over the last couple months, as it became clear that Narendri Modi would win the election and become the country’s new prime minister, something which was confirmed at the end of last week.

Screen Shot 2014 05 18 at 11.49.46 AM

Bloomberg

Why is the Modi story so exciting to investors?

The answer to that is captured nicely in a new report from Morgan Stanley’s Chetan Ahya titled: A Trigger For The Next India.

Basically, because Modi is very pro-growth and development, and because his party won in a gigantic landslide, India may finally have a government ready to institute badly needed political reforms that will reduce the deficit, corruption, bureaucracy, and inflation.

In Morgan Stanley’s terms, the result was a “political tsunami” with the key message being a strong mandate for economic development:

The elections also underpin the point we have made often over the past few months – Indian youth’s rising aspirations, desire for growth and development, and strong leadership are driving the political debate in the country. This increases the probability that the new government will focus on development and governance as its prime agenda. It sets the stage for India’s structural story to unfold in the coming years as we have highlighted in our recent note “The Next India”. We have assumed a greater chance of a reform agenda even though clarity on this will emerge in the ensuing weeks.

The key forecasts:

120514 MS The Next India — From a Cyclical Downturn to a Standard Upturn.pdf

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Posted by on May 18, 2014 in Investments

 

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