New Delhi, November 25
The domestic companies are expected to register earnings growth as high as that in the United States over the next 12 months, supported by attractive macro fundamentals, supportive monetary policy positioning and robust domestic demand highlighted a report by Franklin Templeton, a global investment management organization.
The report stated that the global investment landscape is evolving and changes are creating new opportunities in regions and sectors that have so far underperformed.
It noted that improving profitability and more attractive valuations, along with expected monetary policy easing across the world, are setting the stage for stronger performance outside the United States.
It stated, "Over the next 12 months, earnings growth is expected to be as high in emerging markets as in the United States. That outcome owes much to the macroeconomic growth impulse delivered by monetary easing across the emerging complex".
According to the report, the implication of these shifts is that the leadership of US markets, driven recently by large capitalization growth, technology and artificial intelligence (AI) companies could broaden sustainably.
The report added that prospects appear to be improving outside the US as well, with emerging markets like India showing strong potential.
It also stated that even Europe may participate, supported by both monetary and fiscal easing measures. This could lead to an upturn in the European growth and earnings cycle in 2026.
The report noted that the broadening opportunity set is not limited to equities. Alongside emerging and global central banks, the US Federal Reserve has resumed its easing cycle.
As US short-term interest rates decline, investors are expected to face rollover risk in money market holdings, which may encourage them to shift from cash into fixed income instruments, both public and private, offering exposure to duration or credit returns.
The report said emerging market (EM) debt, sovereign and corporate, in both local and hard currency formats, is likely to be a key beneficiary. For US investors, a weakening US dollar will add to the appeal of emerging local currency securities.
At the same time, falling US rates are expected to reduce the cost of currency hedging for investors in regions such as Europe, the United Kingdom and Japan, increasing their net returns in emerging fixed income assets.
The report further said that an appreciation of emerging market currencies against a weakening US dollar will help lower import prices and reduce overall inflation, enabling emerging central banks to ease further next year.
This scenario would support EM bond prices and create favourable conditions for returns.
- ANI
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