Morgan Stanley’s top stock picks in India consumer and financials on Sensex journey to 1 lakh

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Published: September 29, 2017 1:50:23 PM

Morgan Stanley has been bullish on the Indian stock markets and now it expects domestic consumer and financial sector to perform well in the coming years. We take a look at 10 of Morgan Stanley’s stock picks in the two sectors.

The stock of Edelweiss Financial Services had advanced around 170% to Rs 267 so far in 2017. (Image: Wikimedia Commons)

The investment banking major Morgan Stanley has been bullish on the Indian stock markets and now it expects domestic consumer and financial sector to perform well in the coming years, even as the brokerage sees Sensex surging 1,00,000 in a decade. Morgan Stanley has stated that consumer and financial services sector accounts for 47% of India’s market as of now and will shoot up to 63% in the coming decade. Morgan Stanley also expects that the benchmark equity index Sensex will rise as much as 1,30,000 points in the next 10 years and India will emerge as to become the third-largest economy. We take a look at 10 of Morgan Stanley’s stock picks in the two sectors.

Consumer Services

Ultratech Cement: Shares of UltraTech Cement have returned over 18% since January 2017 so far. The cement manufacturer has reported a rise of 14.9% in the net profit to Rs 890.6 crore in the first quarter of FY 2018, driven by operational income and lower finance cost.

Asian Paints: Shares of the one of the leading paints and associated chemical maker have risen over 25% in this calendar year. However, the company has posted a decline of 20.23% in consolidated net profit to Rs 440.74 crore for the first quarter of 2018 against Rs 552.56 crore in the same quarter last year. The stock of Asian paints had returned around 28% to Rs 1,140 on NSE.

Eicher Motors: Shares of Royal Enfield maker has been on a rising streak and had gained over 40% in 2017 alone. The company has reported a 22% rise in the first quarter ended on June 30 for the FY 2018. The stock of Eicher Motors has risen around 43% to Rs 31,147 on NSE.

Other shares under the consumer services recommended by Morgan Stanley include ITC, the leading diversified Indian FMCG conglomerate which has returned about 9% so far this year to Rs 262.35. ITC has reported a 7.4% rise in the net profit to Rs 2,560.5 crore. Maruti Suzuki shares have jumped nearly 50% in this year so far. India’s largest automobile maker posted a 4.4% rise in the net profit to Rs 1,556.

Financial Services

Bajaj Finance: Bajaj Finance is one of the best performing shares among the blue-chips, returning around 120 % to Rs 1,860 in this year. The company has reported a rise of 42% in the net profit to Rs 602 crore.

Edelweiss Financial Services: Edelweiss Financial Services has a massive up move in this year as far as the stock market performance is concerned. The stock had advanced around 170% to Rs 267 on NSE.

HDFC Bank: The most valuable private sector lender HDFC Bank has returned about 51% in this year. The financial services major had posted a 20% rise to Rs 3,893.84 crore for the first quarter of the financial year 2018.

Other two stock in financial services space recommended by Morgan Stanley includes Kotak Mahindra Bank and ICICI Prudential Life Insurance. The stocks of these companies have risen about 40% to Rs 1,010 and 29% to Rs 390 respectively. Kotak Mahindra Bank posted a rise of 26% in the net profit to Rs 1,346.82 crore in the first quarter and while ICICI Prudential Life Insurance bottom line was flat at Rs 406 crore.

Morgan Stanley on consumer business

India’s consumer sectors alone are likely to add about $1.5 trillion over the next ten years to the domestic equity markets. Accordingly, Ridham Desai MD of Morgan Stanley noted that stock markets are likely to remain robust as a stronger economic growth should drive stronger corporate earnings growth. Not only this, Morgan Stanley also projects gross FDI inflows at $120 billion by the financial year 2026-27, almost double the current 12-month trailing run rate of $64 billion, Ridham Desai said.

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