India`s long term growth story intact, equity markets attractive: Morgan Stanley
Indian equity scene looks attractive — a stock pickers' market — as the country is likely gaining share in global output in the coming decades driven by strong foundational factors including robust population growth, a functioning democracy, macro stability influenced policy, better infrastructure, a rising entrepreneurial class and improving social outcomes, a Morgan Stanley report said on Tuesday.
The implication is that India will be the world’s most sought-after consumer market, it will undergo a major energy transition, credit to GDP will rise and manufacturing could gain share in GDP.
“High frequency indicators were mixed in recent weeks but are distinctly better than a couple of months ago. We expect growth to recover after a H2 2024 slowdown on fiscal and monetary policy support, with recovery in service exports. We expect GDP at 6.3 per cent in FY25 and 6.5 per cent in FY26,” the report mentioned.
Macro-stability should remain in the comfort range, providing flexibility to policymakers.
“We remain ahead of the consensus on earnings. Crucially, India's relative earnings growth is turning up based even on the more conservative consensus forecasts. In the meanwhile valuations are the most attractive since the Covid pandemic,” said the report.
“India's low beta characteristic make it an ideal market for the uncertain macro environment that equities are dealing with. Importantly, our sentiment indicator is in strong buy territory,” it added
This is likely to be a stock pickers' market, in contrast to one driven by topdown or macro factors since the Covid pandemic, said Morgan Stanley.
“A likely positive shift in fundamentals is not in the price – we expect India to recover lost ground against its peer group through the rest of 2025,” it mentioned.
The ongoing quarter may produce upside surprises in earnings. Valuations are attractive across market cohorts. Financials have outperformed and we expect that to continue. Consumer discretionary and select industrials could follow suit, according to the report.
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