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Morgan Stanley demotes India on par with expensive valuations


Morgan Stanley downgraded Indian equities equally overweighted, citing costly valuations.

“We are shifting to an even tactical weight on Indian stocks after strong relative gains – we expect structural earnings recovery over several years, but at 24x futures price relative to earnings we expect some consolidation before the Fed cut, an RBI (rate) hike in February and higher energy costs, ”the investment bank said.

Morgan Stanley’s downgrade follows similar moves by Nomura and UBS on expensive valuations. Indian stocks have significantly outperformed other emerging markets this year, with the MSCI India Index up 27.53%, compared to a 0.65% decline in the MSCI Emerging Market Index.

Morgan Stanley attributed the outperformance to consensus bullish earnings expectations and a “supportive” government reform agenda.

The brokerage had said in a previous report that nascent signs of capital spending, supportive government policy and strong prospects for global growth could push India’s profits up to more than 20% per year for companies. next three to four years.

“While the fundamental leading indicators are positive, we see valuations as increasingly constraining returns over the next 3-6 months,” Morgan Stanley said.

With PTI inputs

(Edited by : Anshul)

First publication: STI

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