'RIL shares to outperform in a month due to short-term valuation'
Morgan Stanley also underpins the fact that the company's earnings are positively correlated with depreciation of the Indian rupee
Shares of Reliance Industries will rise relative to India's benchmark index in next 30 days, said Morgan Stanley citing compelling short-term valuations.
"At current levels, price-to-earnings is 12 times on trailing earnings and price-to-book is 1.4 (times), discounts of 30 (percent) and 35 (percent) to its historical averages. Even on relative price-to-earnings, the stock is trading at a 20 (percent) discount to the Sensex, so valuation looks attractive," said the bank in a note.
Morgan Stanley also underpins the fact that the company's earnings are positively correlated with depreciation of the Indian rupee, which should mitigate recent concerns on refining and petrochemical margins.
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The outlook was cut on weak external demand, low private investment and poor government finances. The US investment house had previously projected India to grow 5.8 percent in the year ending March.
India will continue to face "stagflation-type" situation for a few more months, Morgan Stanley Research said in a report. Stagflation is a situation when economic growth of a country stagnates while inflation is rising.