The markets are flat but there is good news for investors. Morgan Stanley’s Ridham Desai expects India to recover lost ground against its peer group through the rest of the year. Desai also believes that a ‘Stock Pickers’ Market’ is unfolding. According to him a “likely positive shift in fundamentals is not in the price’ for India. This is what may spur the recovery for India.
Morgan Stanley On India: Equity markets look attractive
The Morgan Stanley report highlights optimism on the earnings front, “Crucially, India’s relative earnings growth is turning up based even on the more conservative consensus forecasts. In the meanwhile valuations are the most attractive since the Covid pandemic.”
Desai added that another key factor that’s propelling the optimistic outlook is “India’s low beta characteristic.” This is because it makes India “an ideal market for an uncertain macro environment that equities are dealing with. Importantly, our sentiment indicator is in strong buy territory.”
India’s long term story remains intact
Morgan Stanley is bullish on the long-term India story.
According to Morgan Stanley, “India will be the world’s most sought-after consumer market, it will undergo a major energy transition, credit to GDP will rise and manufacturing could gain share in GDP.” They believe this is possible because India is likely to gain “share in global output in the coming decades driven by robust population growth, a functioning democracy, macro stability influenced policy, better infrastructure, a rising entrepreneurial class and improving social outcomes.”
Growth seen recovering
Morgan Stanley is optimistic about growth recovering and the latest report stated that the “ongoing quarter may produce upside surprises in earnings. Valuations are attractive across market cohorts. Financials have outperformed and we expect that to continue. Consumer discretionary and select industrials could follow suit.”
According to the international brokerage, India’s growth will trend higher, “we expect GDP at 6.3% in FY25 and 6.5% in FY26. Macro stability should remain in the comfort range, providing flexibility to policymakers.”
Morgan Stanley on India: Top bets now
Given the current set-up, Ridham Desai stated that, “This is likely to be a stock pickers’ market, in contrast to one driven by top down or macro factors since the Covid pandemic.”
Morgan Stanley is “Overweight Financials, Consumer Discretionary, Industrials & Technology and Underweight other sectors.”