Global brokerage Morgan Stanley has indicated that Indian stocks could experience a revival soon, though global factors will be crucial to this outcome.
In its latest note, analysts at Morgan Stanley acknowledged that while catching the market bottom is challenging, “buying Indian equities could prove rewarding.”
The brokerage noted that India is emerging from a period of slow growth in recent months, with global conditions improving. Stocks are now priced lower than they have been since the Covid-19 bottom.
The benchmark NSE Nifty 50 and the BSE Sensex have fallen by 13.3% and 11.7%, respectively, from their previous peaks.
Morgan Stanley also highlighted that the Union Budget is supportive of growth, with rising capital expenditure and reduced subsidy expenditure. The Reserve Bank of India’s rate cut and liquidity measures are expected to provide additional support. The note further emphasized that a series of tax reforms in India should encourage foreign direct investment.
Crude oil prices have weakened, and geopolitical conditions are improving with the likely fading of conflicts. “The dollar has corrected, and India’s real effective exchange rate has declined,” the note added.
Morgan Stanley anticipates that India will resume its outperformance relative to emerging markets in the coming months, although this is “subject to global cues not surprising negatively.”
The brokerage pointed to strong macroeconomic stability, improving terms of trade, and projected mid- to high-teen earnings growth annually over the next three to five years as key fundamentals driving potential upside. A reliable source of domestic risk capital is also seen as a positive factor.
In a separate report last week, Morgan Stanley noted that the direct impact of reciprocal tariff hikes by the US will likely be manageable. However, the indirect effect—through uncertainty weighing on business confidence—is seen as more concerning.
Nevertheless, the brokerage maintained that domestic policy will remain supportive of growth, and additional measures will be taken if downside risks emerge.
—IANS
