Such ratings set the course for potential investment opportunities, both domestic and foreign, that align with the nation’s transformative journey.
Morgan Stanley, the global brokerage giant, has recently redefined its stance on Indian markets, upgrading Indian stocks from “equal weight” position to “overweight” rating. In the recently released report, India has proudly ascended to the pinnacle of Morgan Stanley’s rankings, securing No.1 position among emerging markets. This will set a course for potential investment opportunities, both domestic and foreign, that align with the nation’s transformative journey.
“overweight” and “equal weight”
According to analysts, an overweight stock is expected to perform well in the future, making it a wise investment choice. Such stocks have the potential to outdo both the overall market and their sector peers. Morgan Stanley’s overweight rating for India signifies its confidence in the nation’s economic growth. This suggests that foreign investment will likely to continue pouring into the Indian market. Morgan Stanley’s analysts also stated that ‘India is arguably at the start of a long wave boom’.
On the other hand, an equal weight stock, as per an equity analyst, will perform in line with or similar to the benchmark index being used for comparison.
India’s unstoppable rise
Previously India occupied Rank 6 on the list. Now, the nation has jumped 5 places and outperformed Korea and UAE to secure the highest ranking. As per a note from brokerage, three factors have pushed India to its new found glory. Those are supportive foreign inflows, macro stability and positive earnings outlook. Morgan Stanley’s analysts also underscored the pivotal role played by India’s youthful demographic profile, which acts as a catalyst for equity inflows.
This significant upgrade comes in the light of the evolving market dynamics since October 2022 when the firm first identified the dawn of a new bull market in Asian and emerging equities. In 2022, Morgan Stanley also predicted India’s emergence as Asia’s strongest economy in 2022-2023. The brokerage firm said that the nation was best placed to generate domestic demand which had been benefiting from economic policy reforms. Earlier in March, Morgan Stanley had upgraded India to “equal-weight” from “underweight” rating.
What other firms say about India
In a recent report, the financial firm Credit Suisse noted that while worries about growth will increase all around the world in 2023, India might continue to show strong growth trends. This could be because India has strong macroeconomic stability and well-controlled inflation.
Moreover, S&P Global also expects India to grow at an average 6.7% per year from financial year 2023-24 (FY24) to FY31 with capital expansion being seen as a dominant driver of growth. A report titled Look Forward: India’s Moment by S&P Global said, “India has come out of the pandemic reasonably well, with GDP growth of 7.2% in fiscal year 2023.” Even after the global slowdown, India will be the fastest growing economy in the G20.
The S&P reports also mentioned India’s huge potential in the manufacturing sector, saying, “India has immense opportunity to increase its share of global manufacturing exports, and the government is seeking to raise manufacturing to 25% of GDP from 17.7% by 2025.”
IMF also projected the growth of the country at 6.1 percent in 2023 as a result of stronger domestic investment.
China’s dilemma
Interestingly, this assessment juxtaposes India’s trajectory with that of China. While India seems to be embarking on an exciting long-wave boom, China appears to be transitioning from its own growth phase, which might end soon. The disparity is evident, prompting the brokerage to advocate for an “overweight” rating for India and adjusting China’s status to “equal weight”. “We think returning India to an “overweight” rating and downgrading China to “equal weight” is warranted.”
As the global investment landscape evolves, Morgan Stanley’s strategic shift underscores India’s economic resilience and burgeoning potential.
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