In a recent interview, Gokul Laroia, CEO of Morgan Stanley Asia and co-head of global equities, expressed optimism about the future of the US-India relationship, particularly under the potential leadership of Donald Trump. Laroia, who is notably the only Indian on the executive committee of Morgan Stanley, shared insights with Arijit Barman and George Smith Alexander during his visit to Mumbai for the inauguration of the firm’s latest global capability centre.
Laroia addressed concerns regarding Trump’s previous comments about imposing tariffs on Indian exports, indicating that India’s trade surplus with the US is relatively minor compared to other Asian partners. He believes this minimises exposure to tariff-related risks and anticipates that the Indo-US relationship will continue to flourish post-election. He noted that US corporations are likely to increase their investments in India, albeit with less impact than seen in 2018-19.
When discussing recent foreign portfolio investment (FPI) outflows from Indian equities—amounting to $10 billion in October—Laroia attributed these movements more to cyclical growth concerns rather than direct implications from the US elections. He emphasised that while there has been a slowdown in government spending, which coincides with seasonal cycles and excessive rainfall, this weakness is expected to be temporary. With government fiscal budgets projected to ramp up spending in the latter half of the year, Laroia is confident that this will help stabilise market conditions.
Despite some fluctuations in market performance—such as a recent 7-8% dip—Laroia remains bullish on India’s investment attractiveness. He pointed out that local investment flows have significantly reduced India’s beta to global capital flows, making it a unique case in Asia. Notably, systematic investment plan (SIP) inflows have remained robust, reflecting strong domestic investor confidence.
Looking ahead, Morgan Stanley aims to bolster its private equity operations in India. Laroia revealed plans for a new fund focused primarily on Indian investments, marking a strategic shift from previous efforts that were largely China-driven. He indicated that while the size of this fund remains undetermined, they aim for a minimum target of $500 million to $1 billion.
Laroia also highlighted that India and Japan are currently the primary markets for global private equity outside the US. He noted that increasing participation from sovereign wealth funds indicates a growing appetite for investment in India. Furthermore, he mentioned that successful exits through public markets have become more feasible, with 75% of their IPO pipeline consisting of private equity portfolio companies.
As India’s market capitalisation continues to rise and its representation in global indices like MSCI increases, Laroia expects further capital inflows into the country. He acknowledged that while discretionary capital may fluctuate based on valuations and market opportunities, India’s regulatory landscape remains challenging for fund operations.
In summary, Gokul Laroia’s insights reflect a cautious yet optimistic outlook for India’s economic landscape amidst global uncertainties. With strategic investments and a focus on strengthening bilateral ties with the US, Morgan Stanley is poised to play a significant role in India’s financial growth trajectory.
