GUWAHATI: Multinational investment bank and financial services firm Morgan Stanley has asserted that the performance of the Indian stock markets is expected to improve considerably in the coming months.
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In its latest report, India Equity Strategy Playbook, "A Long Way Up," authored by Ridham Desai – Equity Strategist, and Nayant Parekh- Equity Strategist, it said that India could be in the midst of a multi-quarter growth upcycle because of what they call “supportive equity valuations.”
The principal catalyst, however, is how the market gauges the growth gap between India and rest of the world. It added that the sentiment may improve in favour of India if its growth “accelerates.”
“High frequency indicators including earnings look really solid, underscoring an up-cycle in progress due to improving investments, monetary policy support, an undervalued currency, lack of fiscal headwinds and a recovery in consumer sentiment,” the report dated September 4 read.
India, according to Morgan Stanley, is amid far-reaching reforms that could lift growth rates in the coming quarters as well as make investment (capital) flows easier.
Also, it asserted that a rising wave of Initial Public Offerings by companies can lend further support until it turns excessive.
An Initial Public Offering (IPO) is the process where a private company sells its shares to the public for the first time to raise money and get listed on stock exchanges.
Morgan Stanley says it is overweight, meaning bullish, on stocks of companies in Financials, Consumer Discretionary and Industrials sectors, and underweight or bearish on Energy, Materials, Utilities, and Healthcare sectors.
IT services may prove a dark horse as the world turns to these firms to build AI applications and solutions, it added.
“India’s chief risks are largely external, including geopolitical tensions and a
slowing global economy. Domestically, concerns include weak farm productivity, capacity bottlenecks in the judiciary, and embodied AI weighing on labour markets,” the report further read.
India’s benchmark index Sensex is now some 10,000 points below its all-time high of 86,159 points.
In July, Morgan Stanley had projected that the BSE Sensex could climb to 89,000 points by June 2027, implying an upside of around 15 per cent from the then levels. At the time of filing this report, the Sensex is trading at around 76,513 points.