Morgan Stanley has upgraded its outlook on Indian markets from “equal weight” to “overweight”, indicating that the country’s economy is expected to perform better in the future. In a note late Wednesday, the global brokerage pointed out easing valuations in India as compared to October 2022, when the global brokerage identified the onset of a new bull market in Asian and emerging market equities.
It said the situation in Indian markets is in stark contrast to that in China, with the country at the start of a long-wave boom at the same time as China may be ending one.
India is now the top-ranked, most-preferred market among emerging markets (EMs), rising from the sixth spot, due to supportive foreign inflows, macro stability and a positive earnings outlook, the brokerage said in a note late Wednesday.
“We think returning India to an “overweight” rating and downgrading China to “equal weight” is warranted,” analysts said, referring to the Indian markets’ outperformance over China as a sign of a structural breakout in favour of India.
The brokerage also sees “a secular trend towards sustained superior earnings per share (EPS) growth versus EM over the cycle”. It said a young demographic profile is supporting equity inflows.
Morgan Stanley also said there are things that have fundamentally changed in India, including structural reforms, supply-side reforms like corporate tax cuts and production-linked incentive (PLI) schemes, and regulation and formalisation of the economy.
Sectorally, the brokerage remains overweight on financials, consumer discretionary and industrial segments in India, and has an “add” rating on Larsen & Toubro and Maruti Suzuki India in its Asia Pacific focus and Global Emerging Markets lists.
(With Inputs from Agencies)
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