Steady nominal GDP growth to increase India MSCI EM weight: BNP Paribas AMC Morris

Copyright © HT Digital Streams Limit all rights reserved. Steady nominal GDP growth will gradually increase the weight of India in MSCI EM index, says Morris van BNP Paribas AMC Dipti Sharma 6 min Read 09 Jun 2025, 05:30 AM IST BNP Paribas Asset Management’s main market strategist Daniel Morris said that the services are more exporting, A potential beacon of stability and growth in a volatile world environment. The growth of India is powered by domestic consumption, services and a rising middle class, making it a potential beacon of stability and growth in a volatile world environment, according to Daniel Morris, main market strategist at BNP Paribas Asset Management. If India still grows its nominal GDP at a low double-digit rate, it will support a gradual increase in its weight in the MSCI Emerging Markets Index, says Daniel Morris, main market strategist at BNP Paribas Asset Management. India is already the second largest weight in this index, and a further weight increase will help attract more benchmarks to the country, he told Mint. Morris, a comparison between China and India in the emerging markets, said that, unlike China, which is more export -oriented, India’s growth is driven by domestic consumption, services and rising middle class, making it a potential beacon of stability and growth in a fleeing world environment. Edited Extracts: How would you describe the current world sentiment? Do you think that the tariff wars are behind us now? We will know more in 90 days. Right now, the market seems to appreciate that we have moved in the negotiation phase. The original reciprocal rates were never intended to stay high, it was a way to get attention and bring countries to the table that worked. We have already seen reductions and offers like the one with the UK, with others going. The US holds a strong negotiating position as it is the world’s largest market and a major destination for global exports. While India is less dependent, the lever is still important. Ideally, we will see a positive outcome: slightly higher US rates, but lower elsewhere. We will have to wait and see how it plays. Also read: Andy Mukherjee: Importers hit by Trump rates can relieve ‘glocal banks’ with tension, do you think the expected loss in the short term can now be pushed back? The Fed (US Federal Reserve) made it clear at the last meeting that inflation is still a concern. Since then, one of the speed cuts in which the markets were priced has been effectively withdrawn. The most recent CPI data has not yet shown much pressure on inflation, so now everyone is waiting to see what is happening next month. At the same time, the Fed is also watching the growth closely. Here is a parallel to the pandemic. At the time, most predictions for growth and inflation were wrong, not because the analysts were down, but because we were in a completely unknown area. No model could really capture what was going on. It feels similar now. We are in a situation we have not seen before, so we still fly blind in some ways. Everything depends on how the data takes place, both for growth and inflation and the reaction of the Fed will result from it. I can make a prediction, but honestly, confidence in any prediction is low at the moment. It is a very volatile, very data-dependent environment. Where are India placed among global peers in the investment landscape? India has emerged as a top global FDI destination, with $ 36 billion inflow into FY14 to over $ 80 billion in FY25. In a multi-polar world and constantly changing geopolitical landscape, it seems that India is on the right of the global block, with the potential to take advantage of global supply chain interruptions, providing a credible alternative to China. Structural reforms such as Makes in India, PLI (Production linked incentive) schemes, and comfortable business strengthened its attraction and positioned India as a long -term investment center. With a young workforce, growing infrastructure and stable macroeconomic prospects, India is well placed to attract sustained world capital and play an important role in the developing multipolar global economy. Also read: RBI rate cuts, fiscal support that is likely to help the FY26 earnings recovery: Sanjay Chawla of Baroda BNP Paribas MF Fiis apparently made a return. Do you think this foreign inflow would continue in India? Yes, FIIs (foreign institutional investors) made a return in April, supported by India’s robust macro economic background, oil prices relief and stock market valuations that have become reasonable. The recent softness in the US dollar index has also contributed to a shift in global capital flow to emerging markets, with India appearing as an important beneficiary. The Reserve Bank of India played an important role by building a strong buffer for foreign exchange reserve, which helps reduce currency volatility. We are in a situation we have not seen before, so we still fly blind in some ways. Everything depends on how the data takes place, both for growth and inflation and the reaction of the Fed. It is a very volatile, very data-dependent environment. With a young workforce, growing infrastructure and stable macroeconomic prospects, India is well placed to attract sustained foreign investor flow. The reduced correlation of the Indian stock markets with global markets further translates into excellent diversification benefits for foreign investors, which will help India get its rightful part of foreign capital flow. What is your regional attitude? What is different today is that we honestly do not have a clear geographical overweight. Broadly, we still like shares, but it is not clear which markets outside the US will perform better. So we are now neutral geographical. Normally we would have a local tilt, but it is one of those strange moments where it is unclear which markets will lead, and this is partly because there is no extreme divergence in valuations and expectations in earnings over markets. Also read: Trump says XI has agreed to restore the flow of rare earthmineral. Why is rare earth important to the Chinese economy? How do you look at India to China in the emerging market basket? India stands out under emerging markets due to its domestic driven economy, which provides resilience amid global uncertainty. Unlike China, which is more export -oriented, the growth of India is powered by domestic consumption, services and a rising middle class. This makes India a potential beacon of stability and growth in a volatile world environment. If India still grows its nominal GDP at a low double-digit rate, it will support a gradual increase in its weight in the MSCI Emerging Markets index. India is already the second largest weight in this index and further weight increase will help attract more benchmarks to the country. The profits in China’s stock markets are mainly driven by a few number of shares in the technological sector; There is a similar concentration as seen in the US ‘beautiful 7’ supplies. The proceeds of these shares in China reflect the talent and innovation we saw in the Deepseek announcement, as well as the confirmation of the government’s support for the sector. We believe that the outlook here is more encouraging, while the rest of the market suffers from both the threat of rates as well as the poor domestic demand environment. Let’s move to asset classes such as gold and silver that have already seen a strong run. Do you think it may be time to reduce exposure to precious metals? After the very good performance, we returned to neutral on precious metals. We have already seen gold prices withdraw a little, as geopolitical tensions have relieved, which makes sense. But when I look forward, there are two more key drivers who support gold. First, some central banks of US treasury have redistributed in gold, something we expect to continue, which should support prices in the medium term. Second, with the constant uncertainty surrounding US policy, gold still serves as a hedging against unexpected events. Thus, while the volatility is expected in the short term, the medium -term prospects remain positive. How do you see the dollar move forward, now that the tension between the two giants relieves? Despite the expectation that Fed tariffs should remain higher, which would normally support a stronger dollar, we have seen it weaken over the past month or so. We think it was mainly driven by fund flow, with foreign investors redistributing some of their US portfolios in other markets. As we have said before, we are neutral about where exactly the money is heading. The most important question now is whether that redistribution mostly played out. While it is difficult to predict, we can see a little stabilization in the dollar in the future. Catch all the business news, market news, news reports and latest news updates on Live Mint. 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