Morgan Stanley has these four Indian stocks on focus list; ‘overweight’ on India shares

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Updated: Nov 28, 2018 11:00 AM

In emerging markets, Morgan Stanley has maintained an overweight rating for India, saying that the south Asian nation should benefit the most from falling crude oil prices, which raise the concerns about a growing current account deficit (CAD).

Asia StocksMorgan Stanley has maintained that the bear market is almost over for emerging markets.

Global Strategy Outlook report: After witnessing a huge foreign money outflow in 2018, emerging markets including India will likely outperform developed markets in 2019. Morgan Stanley, in its Global Strategy Outlook report for 2019, has upgraded emerging markets stocks from “underweight” to “overweight” for the next year while maintaining that the bear market is almost over for emerging markets. On the other hand, the investment bank downgraded US equities to underweight and is targeting S&P 500 at 2,750 by end-2019.

In emerging markets, Morgan Stanley has maintained an overweight rating for India, saying that the south Asian nation should benefit the most from falling crude oil prices, which raise the concerns about a growing current account deficit (CAD).

“We think the bear market is mostly complete for EM (emerging markets), has further to go in U.S. credit and is about to begin for the U.S. dollar…We are taking larger relative positions and adding to EM,” the bank said in the report dated November 25.

Also Read: Share market LIVE updates: Sensex gains 100 pts, Nifty above 10,650; Infosys, RIL top index contributors

The global investment bank is expecting the US dollar to weakened and the US Fed to hold back on interest rate hikes in the second half of 2019. It may be noted that 2018 saw many investors withdrawing from emerging markets and buying more assets in the US, due to an increase in bond yields and appreciating dollar. On the other hand, financial troubles in countries like Turkey and Argentina gave investors more reasons to exit emerging markets.

Apart from India, Morgan Stanley has given an overweight rating to Brazil, Thailand, Indonesia, Peru, and Poland within the emerging markets, while key Underweights named in the report are Australia, the Philippines, Mexico, Colombia, Greece, and UAE.

The investment bank further said in the report that the Reserve Bank of India (RBI) is not likely to raise interest rates, due to prevailing difficulties in the banking sector and inflation, which has favoured the central bank.

“We expect the RBI to resume the hiking cycle in 2Q19 and build in two rate hikes in 2019 and a further two in 2020, as inflation rises from the low of 2018 and the Fed continues with its rate hike cycle in 2020,” said Morgan Stanley.

Indian stocks in Morgan Stanley’s Focus List

According to the report, the four Indian stocks, which have been included in Morgan Stanley Asia Pacific ex-Japan Focus List, are ICICI Bank, GAIL India, Tata Consultancy Services and L&T.

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