India economy boost: Morgan Stanley raises India's market outlook to 'overweight', lowers China's rating
New Delhi, August 03: Morgan Stanley has upgraded its view on India's markets, shifting it from "equal weight" to "overweight" as the nation's reform and macro-stability agenda signal strong capex and profit prospects. The "overweight" rating indicates that the firm expects India's economy to perform better in the future. This upgrade comes amidst the US losing its AAA status and China facing an economic slowdown.
Morgan Stanley's analysts highlighted that India's macro indicators demonstrate resilience, and the economy is on track to achieve the 6.2 per cent GDP forecast. Consequently, India has become the top-ranked and most-preferred market among emerging markets (EMs), rising from the sixth spot. The country's positive outlook is attributed to supportive foreign inflows, macro stability, and encouraging earnings prospects.
"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," stated the Morgan Stanley analysts.
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Conversely, the firm downgraded Chinese stocks to "equal weight," advising investors to capitalise on the rally stimulated by government stimulus initiatives and take profits.
According to the report, India appears to be entering a potentially long wave of economic growth, while China may be experiencing the tail end of a previous growth phase.
"We think returning India to an 'overweight' rating and downgrading China to 'equal weight' is warranted," the report added.
Recent days have seen Chinese assets experience a boost due to various promises made by Beijing to boost growth and revive the nation's private sector. However, analysts at the bank cautioned that these easing measures might be implemented piecemeal and may not be sufficient to sustain share price gains.
This latest upgrade follows Morgan Stanley's previous move a few months ago when it shifted India's status from "underweight" to "equal weight," reflecting the country's resilient economy.
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- With inputs from agencies
