(Bloomberg) -- India’s strong economic expansion over the next 10 years, coupled with a growing population, will help boost the share of the country’s assets in investor portfolios, according to Amundi Asset Management.

“Investors’ attention should be turning to India,” Monica Defend, head of Amundi Institute, wrote in a note dated May 26. Apart from its demographics, “India has all the necessary components to become a key engine for global growth.” 

The South Asian nation is projected to contribute up to 15% of global growth in 2023 and its economy is expected to expand at an average of 5.2% per year over the next decade, ahead of emerging and developed market peers.

The government’s aim to expand the country’s role in global supply chains via incentives will also support growth. That has gotten foreign investors to load up on Indian equities.

As inflation cools, a pickup in consumption and improved earnings will help India’s stocks “overperform” main equity markets, Defend said. Investors are increasingly turning to value stocks, cyclical industries, and mid- and small-capitalization companies, which have fared well in the post-Covid recovery.

READ: Record-Bound Indian Stocks Reclaim Spot in World’s Top 5 Markets

The outlook for fixed income investment in India is also turning favorable as market yields are offering positive real rates across most maturities while the central bank’s tightening cycle is likely over, according to Defend. She also expects the Indian rupee to perform better in 2023 than the previous year.

“Markets may soon begin to anticipate a turn in policy, although some stickiness in core inflation means that the central bank will not be able to ease quickly,” she said.

Defend sees 2023 as a year of transition for India, which is characterized by a modest slowdown in growth. Still, stable macro conditions will set the stage for a sustainable recovery in the South Asian economy.

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