Given softening values compared to October 2022, when the global brokerage recognized the beginning of a new bull market in Asian and emerging market equities, Morgan Stanley has changed its outlook on Indian markets to “overweight” from “equal weight.” Due to encouraging foreign inflows, macroeconomic stability, and a favorable forecast for profitability, India has risen from sixth place to the top spot among emerging markets (EMs), according to a note published by the brokerage late on Wednesday.
The analysts at Morgan Stanley noted that a young demographic profile is encouraging equities inflows and that they “see a secular trend towards sustained superior earnings per share (EPS) growth versus EM over the cycle.” Financials, consumer discretionary, and industrial industries continue to be overrepresented by the brokerage in India, and Larsen & Toubro and Maruti Suzuki India have “add” ratings on both the Asia Pacific focus and Global Emerging Markets lists. With India beginning a long-wave boom at the same time that China may be concluding one, the scenario in Indian markets is in sharp contrast to that in China, the report stated.
Analysts referred to the outperformance of the Indian markets over China as evidence of a structural breakout in favor of India and added, “We think returning India to a “overweight” rating and downgrading China to “equal weight” is warranted.”
