Key Points

The report highlighted that India is benefiting from a combination of falling inflation, improved system liquidity, and lower government borrowing, which are expected to support economic growth.

The report adds that India is expected to post the highest GDP growth among countries in JP Morgan's global universe in 2025. Growth is also being supported by timely demand stimulus and measures that have strengthened urban household balance sheets.

In addition, a recovery in the rural economy, further aided by a favourable monsoon, is adding to the positive outlook.

It stated, "India: Falling inflation, enhanced system liquidity and lower borrowing to boost growth. Timely demand stimulus and support to urban household balance sheet".

JP Morgan's emerging markets strategists are constructive on several emerging market countries, including India, Korea, Brazil, Philippines, UAE, Greece, and Poland. Among these, India holds a 19 per cent weight in the MSCI EM Index and has been rated "Overweight" (OW) by JP Morgan.

The report noted that EM equities had seen significant outflows since August 2023, but this trend has begun to reverse in recent weeks, with inflows starting to pick up. This change suggests growing investor confidence in the EM space.

On the valuation front, MSCI EM is currently trading on the cheaper side of fair value compared to developed markets (DMs).

According to the report, foreign exchange (FX) remains an important factor in EM equity performance. Historically, EM equities tend to perform inversely to the US dollar.

The recent weakening of the US dollar, especially after the announcement of tariffs, could benefit EM equities further.

The report also highlighted a positive trend in earnings forecast revisions. After experiencing consistent downward revisions over the past couple of years, the forecast revision index for EMs compared to DMs has started to move upward, indicating a more optimistic outlook.

India's YTD (year-to-date) performance as of now stands at 5.8 per cent in local currency terms and 5.7 per cent in US dollar terms. Despite not being among the top-performing EM countries in absolute numbers, India's stability and growth outlook make it a strong contender for long-term investors.

Overall, the report suggested that with improving fundamentals and favorable conditions, India remains a key market to watch among emerging economies.

- ANI