India A Safe Bet Among Emerging Markets, Says CLSA's Alex Redman

India is a safe bet among emerging markets in a global economic environment that will be shaped by the trade policies of US President-elect Donald Trump, according to Alexander Redman, the managing director and chief equity strategist at CLSA.

Despite global uncertainties and protectionist measures, India remains attractive due to its stability, growth potential, and domestic demand-driven economy, Redman said in a press meet on Monday.

While gross domestic product growth, earnings trajectory, and stock market performance in India may seem divergent, the country still stands out as a long-term investment destination, Redman noted.

• Valuation advantage: As per Redman, a 10% correction in valuations has made Indian markets more appealing to global investors.  

• Domestically driven economy: India’s relatively closed economy is also a key contributor in making it appealing in the current scenario, the top CLSA official said. 

• Growth story: Among all emerging markets, India offers the most promising growth story due to its demographic dividend, urbanisation potential, and credit penetration opportunities, he pointed out.

Redman mentioned that recent foreign outflows from India were driven by reallocations to China, with large-cap stocks like Reliance Industries and Samsung being sold to fund these moves.

While China is seen as a recovery story due to its fiscal capacity, the limited economic stimulus announced by Beijing, combined with the geopolitical tensions, makes it less favourable, he said.

On the other hand, India’s consistent growth and relative stability are likely to attract renewed foreign investment shortly, the CLSA chief equity strategist noted.

Redman shared his views on the potential impact of Trump's trade policies, including high import tariffs, on emerging markets:  

• Tariff implications: US tariffs could increase domestic inflation by 2%, raise household costs by $2,600 annually, and reduce GDP by 1%, he claimed.

• Retaliatory risks: The tariffs can draw countermeasures from China and the European Union, which could disrupt American industries. However, India’s domestically driven economy remains insulated from such shocks, Redman said.

• India’s strength: As global investors pivot towards safer markets, India’s reliance on domestic demand offers a buffer against international trade disruptions, he added.