Morgan Stanley has upgraded Indian stocks to equal weight from underweight, a rating it had given in the first quarter of 2011.
“On the absolute trailing Price/Book multiple, India is trading at 2.1x currently, which is similar to the level of 2.0.x seen at the trough of the cycle in 2002 and 2008,” the brokerage said.
This is an indicator of the extent to which the India market is already pricing in the adverse global environment and the current domestic situation of high inflation and slower trend GDP growth, it said.
India’s GDP growth slowed to a nearly nine-year low of 5.3 percent in January-March, and inflation in May stood at 7.55 percent, pushing the country into a potentially stagflation-like situation.
Rating agencies and economists have been pushing the government to take up reforms to cut down fiscal and current account deficits.