Morgan Stanley Upgrades India’s Shares To ‘Overweight’; What It Means

Brokerage firm Morgan Stanley has upgraded India’s status from ‘equal weight’ to ‘overweight’ to its stock market, nearly after four months. ‘Overweight’ rating means that the brokerage firm expects India’s economy to perform better in the future.

According to a note released on Wednesday, India has now ranked among most-preferred markets among emerging markets, rising from sixth position. The firm believes that India’s reform and macro-stability agenda supports a strong capex and profit outlook.

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India's macro indicators remain resilient, and the economy is on track to achieve the 6.2% GDP forecast, the brokerage firm said. "India rises from 6 to 1 in our process, with relative valuations less extreme than in October, and India's ability to leverage multipolar world dynamics is a significant advantage," Morgan Stanley analysts said.

It further added, “India is arguably at the start of a long wave boom at the same time as China may be ending one.”

On the other hand, the brokerage firm has also cut its rating on Chinese stocks to equal weight, citing investors should capitalize on a rally spurred by government stimulus pledges to take profits.

The foreign brokerage said it has downgraded MSCI China to equal weight as growth and valuation concerns remain. It further explained that India’s situation is in stark contrast to that in China "as borne out by our recent visit in June to the MS annual investment summit in Mumbai," it said.

India in sweet spot

Experts believe that India is now in a sweet spot and will continue to witness a healthy inflow of foreign funds because of its robust economic outlook. 

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Shrey Jain, Founder and CEO of SAS Online, was quoted as saying by Livemint, “ Morgan Stanley's bullish stance on India serves as an invitation not only to Indian investors but also to investors worldwide, including FIIs and rating agencies. We can expect a continued inflow of foreign capital into the Indian market.”

The International Monetary Fund (IMF) also raised India’s GDP growth to 6.1% for FY24 from a previous estimate of 4.9% and also expects India’s inflation to decline to 4.9% in FY2024. 

“The government debt to GDP ratio moderated further and capex is rising significantly. All this will augur well for the country and will boost foreign capital inflow,” G. Chokkalingam, Founder & Head of Research at Equinomics Research, was quoted as saying by Livemint.