BlackRock sees India as a key investment destination, advises higher allocation in portfolios

"If we were thinking for anybody with an investing horizon 5, 10 years out, we would be building portfolios today using our core IP, where you would hold a greater allocation than a benchmark weight," Paul stated during an interaction with ET Now.

The firm maintains an overweight position on both Indian equities and bonds, backed by India's favourable demographics and economic growth potential.

Strong structural growth and favourable demographics

Paul emphasised that India presents significant structural growth opportunities, making it imperative for investors to allocate a higher portion of their portfolios toward the country.

"Structural opportunities are sizable in India. The demographic forces underpinning India are really strong, and the country’s multi-aligned geopolitical stance is likely to benefit it more in the future," he said.

According to BlackRock, India's young and growing working-age population sets it apart from major developed markets and China, where labour shortages are projected over the next two decades. This demographic edge, combined with India’s strategic geopolitical position, places the country in a favourable spot to drive future growth.

India's advantage amid global macro shifts

Paul also highlighted that global economic shifts, especially in labour markets and geopolitics, further strengthen India's investment appeal.

"Most of the developed markets and China are going to experience a shortfall in the working-age population over the coming 20 years. India is going to experience a big gain in the working-age population in the coming years. And you think about the geopolitical dynamics that we are in now, a multi-aligned country such as India is likely to benefit from that sort of environment," Paul explained.

This combination of demographic strength and geopolitical neutrality positions India to attract substantial global investments, BlackRock believes.

Distinguishing short-term fluctuations from long-term potential

While acknowledging that India faces short-term market fluctuations due to global liquidity constraints and consumption challenges, Paul emphasised that such cyclical dynamics should not overshadow the country's long-term fundamentals.

"We cannot assume that we will never see cyclical dynamics. Liquidity has been constrained, consumption is more challenged, and global uncertainty remains. But once these unwind, attention will shift back to fundamentals," he noted.

Paul advised investors to look beyond temporary volatility and instead focus on India's structural growth story, which remains firmly intact.

Valuations and earnings growth justify investment

Addressing the ongoing debate about high market valuations, Paul noted that Indian equities remain attractive when viewed in the context of expected earnings growth and historical risk premia.

"If you think about risk premia associated with Indian stocks, I would argue that it is not particularly expensive in a historical context. Taking into account future earnings growth and different rate cycles, Indian equities remain attractive," Paul stated.

While traditional valuation metrics might indicate high stock prices, Paul believes that anticipated earnings growth and stable interest rates justify India's current market positioning.

Portfolio Strategy: Large-caps and bond exposure

Paul maintained a positive long-term outlook for India, recommending that investors prioritise large-cap equities with strong earnings potential while also considering selective exposure to Indian bonds for stable returns.

"International investors will want to tap into India’s opportunities as the focus shifts back to fundamentals," he remarked.

Paul believes that India's market resilience, supported by demographic strength and favourable macroeconomic conditions, positions it as a critical component of a globally diversified portfolio.

Long-term growth story remains intact

Summarising BlackRock's stance, Paul reiterated that despite temporary market fluctuations, India's long-term structural growth prospects remain compelling.

"On a structural horizon, there is an opportunity in India. We see strong demographic forces, favourable geopolitical positioning, and long-term economic momentum supporting future growth," he said.

BlackRock's continued overweight position in Indian equities and bonds reflects its conviction in the country's long-term growth potential. Paul advised investors to stay invested, focus on high-quality stocks, and maintain a long-term investment approach to capitalise on India's growth trajectory.