Time for foreign investors to re-engage in Indian market: Morgan Stanley

Morgan Stanley, a global banking group, has put India on the top spot from the sixth position and has upgraded the country’s rating to ‘Overweight’ from “equalweight”, marking a significant shift in its assessment. Morgan Stanley’s Chief Asia and Emerging Markets Equity Strategist Jonathan Garner said, “It is time for foreign investors to re-engage with the Indian market.” In an interview to CNBCTV18, Garner said, “India has underperformed the rest of Asia and emerging markets in aggregate over the last nine months, it has been a volatile period of performance relative. But when we reran our process, it was strongly indicating taking profits in particular in Taiwan, moving to the sidelines on China, going underweight Australia, whereas for India, some of the secular drivers of the market are really falling into place.” Why Morgan Stanley upgraded India? India has been upgraded by Morgan Stanley for its secular leadership as the banking group sees a secular trend towards sustained superior EPS growth in USD terms compared to other Emerging Markets and a young demographic, which supports equity inflows. Stable rupee Garner pointed out another key aspect of India’s market stability. He said “The tendency of the Indian rupee to be far more stable than in the past and to actually appreciate in real effective exchange rate terms versus the currency basket, which is in sharp contrast to the Chinese renminbi that is now structurally starting to depreciate,” A sharp rally in the Indian equity markets from their lows in March is also giving fillip to the India’s upgraded ranking. The Nifty 50 index saw a gain of over 3,000 points and came quite close to reaching the 20,000-mark. While there has been a correction of around 500 points from the highs, the index remains positive on a year-to-date basis. “So, the market is not as expensive, particularly on a relative basis as it was last October, when relative to Taiwan and Korea, it’s probably the most expensive we have ever seen,” Garner said. “It’s clearly not at any kind of low valuation, but there are so many positives in the market right now that we suspect investors will be happy with the multiple.”