Ridham Desai says India’s growth is set to surprise on the upside

"I think we are now getting into a phase where growth will surprise to the upside," says Ridham Desai, Managing Director and Chief Equity Strategist at Morgan Stanley India.

He believes India is emerging from a mid-cycle soft patch and is set for a stronger-than-expected recovery, backed by a 'magic Budget' and likely monetary policy support.

The Reserve Bank of India's Monetary Policy Committee is scheduled to meet from February 5 to 7 this week.

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Desai pointed out that the past five to six months saw a slowdown due to extreme weather, election-related disruptions, government spending constraints, and tight monetary conditions. However, with these pressures easing, there will be a turnaround soon.

He expects new opportunities to emerge in midcap and smallcap stocks after their recent correction, although it also depends on what happens in other global markets.

"After this steep correction, now SMIDs (small and mid-sized stocks)  are looking better than they have been for almost seven or eight months," he said.

He is bullish on private banks, consumer discretionary, and some parts of the technology and industrials sector.

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Desai pointed out Budget 2025's focus on capital expenditure (capex), with central government spending as a percentage of gross domestic product (GDP) increasing from 4.1% to 4.3%. He also noted the introduction of new sectors for capex, such as water distribution and housing, shifting away from previously prioritised sectors.

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The income tax cuts, he said, will provide a significant consumption boost, especially for higher-income groups.

Watch the accompanying video for the full interview.

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