Index returns may moderate but you should buy on dips, says Morgan Stanley’s Ridham Desai

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Updated: August 22, 2017 11:53:55 AM

Ridham Desai advises the investors to buy especially when markets dip.

Buy especially when markets dip, says Ridham Desai of Morgan Stanley. (Image: Reuters)

Afraid of the correction in the markets? Don’t be, says Ridham Desai of Morgan Stanley. In conversation with ET Now, the managing director of Morgan Stanley India told the investors to buy especially if the markets dip. The S&P BSE Sensex is up by 17% in the year so far. The recent correction has caused the Sensex to lose 2% in the last one month. He expects moderation in the index returns going forward.

Nifty touched the 5 digit mark of 10,000 on 25 July. Earlier, Ridham Desai had said in an interview with CNBC-TV18 that he expects the index to reach 30,000 points — that’s for NSE Nifty, not for BSE Sensex — in the next five years, on the back of renewed consumption, greatly improved exports and infrastructure spending by the government, this roughly works out to a CAGR of 25.33% for the Nifty over the next five years.

“We are in the midst of a cyclical recovery in the economy which is good for earnings. The market will not go up in a straight line but it is safe to assume that it is a well-entrenched bull market, and there is considerable more upside for the long-term investor,” Ridham Desai had said then.

He continues to prefer growth stocks. Morgan Stanley has identified seven stocks that are likely to enter in $10 billion market capitalisation in over three years in a recent research report.

Shares of Cummins India, JSW Steel, Lupin, M&M Financial, Petronet LNG, UPL, and ZEE Entertainment are included in the list.  There are seven stocks which are already in the $10 billion market cap club including Bajaj Auto, BPCL, HDFC Bank, IndusInd Bank, Infosys, Mahindra & Mahindra & Maruti Suzuki India.

Morgan Stanley has identified three reasons why mega caps will be an important space to watch out for. As the Indian stocks gain weight in the MSCI EM index, Morgan Stanley expects that the market will attract bigger inflows, which will make it imperative to invest in big liquid funds. Secondly, as India’s domestic institutions grow in size, they will no longer be able to rely on mid-cap and small-cap stocks to generate outperformance. Hence, identifying the right large cap/ mega cap stocks may become crucial for generating alpha. Lastly, the global investment bank believes that domestic ETFs’ assets are likely to grow 30x in the coming decade to $200 billion.


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