Morgan Stanley Upgraded India’s Status to Overweight Due to Economic Potential

Morgan Stanley, the brokerage firm, has upgraded India’s status to ‘overweight’ due to its belief in the country’s potential for substantial and sustained economic growth, especially amidst a global slowdown. The firm previously elevated India from ‘underweight’ to ‘equal weight’ just four months ago, citing reduced valuation premium and a resilient economy. India has now secured the top spot in Morgan Stanley’s rankings.

Morgan Stanley Upgrades India’s Status And Degraded China

The upgrade is attributed to the decreasing extreme valuations compared to last October, driven by the trend of a Multipolar World and increased foreign direct investment (FDI) and portfolio flows. India’s reform-oriented and macro-stable agenda further strengthens its prospects for capital expenditure (capex) and profitability.

Morgan Stanley has made specific sector upgrades for India, favoring industrials, financials, and consumer discretionary stocks. These sectors are expected to benefit significantly from India’s ongoing structural growth story. The firm added Indian stocks like Larsen & Toubro and Maruti Suzuki to its Asia-Pacific Ex-Japan focus list and the Global Emerging Markets (GEM) focus list, while removing Titan from the list.

Despite the positive outlook, Morgan Stanley notes several key downside risks for the Indian market, including potential adverse effects from unexpected inflation surges and changes in monetary policies if productivity improvements do not keep pace. Additionally, the potential disruptive impact of artificial intelligence on India’s services exports and the labor force is a concern.

Apart from India, Morgan Stanley also upgraded Greece to ‘overweight’ and downgraded Australia to ‘underweight’. They also revised MSCI China and Taiwan from ‘overweight’ to ‘equal weight’.

Regarding the Sensex, Morgan Stanley predicts it to reach 68,500 points by December, reflecting a potential 10 percent increase from the current level. The firm expects the index to trade at a trailing price-to-earnings multiple of 20.5 times, reflecting greater confidence in medium-term growth compared to the 25-year average of 20x.