Global investment bank Morgan Stanley has identified 22 large Indian companies including marquee names such as HDFC Bank, ICICI Bank, Mahindra & Mahindra, among others, which are slated to report strong earnings over the next two years. The earnings of these 22 companies will improve due to less overvalued rupee, increased government spending, softer real interest rates and positive growth outlook, Morgan Stanley said. However, investors must also watch out for risks such as election results, rising crude oil prices, excessive fiscal discipline and global economic slowdown, which may hurt corporate earnings, the brokerage firm said. India out of the woods In its recent report, Morgan Stanley said: \u201cIndia is coming out of its deepest and longest earnings recession, which has taken profit share in GDP to all-time low, last seen in 2002.\u201d As profits mean revert relative to GDP and with a likely acceleration in GDP growth, Morgan Stanley thinks earnings could compound around 20% per annum over the next four to five years. Corporate India lost profits to its global counterparts because of poor investment decision, risk aversion and some policy actions, according to the Morgan Stanley report. However, most of these factors have reversed and the new earning cycle has begun, which can really last for next 4-5 years because of higher capacity utilisation, increased investment, recovery in risk appetite and softer real interest rates. \u201cAt this point, one can say that terms of trade (oil prices), the Fed, geopolitics, domestic rates, and likely political outcomes (among other factors) are affecting share prices, in addition to the potential for a new earnings cycle,\u201d Morgan Stanley said. Morgan Stanley has recommended investors buy stocks in domestic cyclicals and financials. It has recommended both consumer companies and industrials, and its current favorites are automobiles, hotels, airlines and cement - as well as banks, select non-bank financials, and real estate. Global risks According to the global investment bank, the risk appetite is coming back to corporates as their debt to equity is now rising again. Also with the depletion of capital stock, even a small acceleration in demand would result in higher pricing in several domestic sectors, the result of which is already being seen in banking, hotels, airlines, commercial real estate, and cement and this could spread to other sectors by 2020. The brokerage has warned against investing in sectors with global exposure including technology, pharmaceuticals, and global materials. \u201cThe leakage of earnings to oil is still a concern and should be monitored for near-term earnings performance. If the rupee gains in real effective terms, it could prove to be a headwind for earnings,\u201d said Morgan Stanley. \u2018Catch\u2019 22 Here\u2019s the list of all 22 companies picked by Morgan Stanley, which it says will likely report strong earnings over the next two years: HDFC Bank; ICICI Bank; Dabur India; Axis Bank; Ashok Leylend; Bajaj Finance; Biocon; Dr. Reddy\u2019s; Gujarat Gas; Havells India; Indian Hotels Co; Info Edge (India); Interglobe Aviation; Jubilant Foodworks; Just Dial; Larsen & Toubro; Mahindra & Mahindra; Oberoi Realty; Shriram Transport; Titan Industries; United Spirits and Apollo Hospitals.