Morgan Stanley upgrades India, downgrades China

Bengaluru, August 3

Morgan Stanley has upgraded its view on Indian markets to ‘overweight’ from ‘equal weight’, citing easing valuations as compared to October 2022, when the global brokerage identified the onset of a new bull market in Asian and emerging market equities.

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 positive earnings outlook, the brokerage said in a note late on Wednesday.

“We see a secular trend towards sustained superior earnings per share (EPS) growth versus EM over the cycle,” Morgan Stanley analysts said, adding that a young demographic profile is supporting equity inflows.

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.

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, it said.

“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. — Reuters

Most-preferred among emerging markets

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 positive earnings outlook, the brokerage said in a note late on Wednesday.