Morgan Stanley bullish on India growth story in long-term

Inflationary pressures seem to be affecting the performance of almost all emerging markets. According to Morgan Stanley Smith Barney's David Darst, the second half of the year will be driven by inflationary concerns. While interest rate increases by many central banks has left investors not too confident, there does seem to be considerable amount of interest emerging in these economies, he says.

Morgan Stanley Smith Barney has been underweight on India in the short-term for a couple of reasons. "One is the monetary tightening while the other is the price to book value versus the price to book ratio in India is 3.3 times which is a little on the expensive side."
However, the India growth story in the longer-term is very attractive, placing India in a very sweet spot, according to him. The service economy, the infrastructure story and the incredible demographic and structural positioning of India is positive. We view India as an investment opportunity," he adds. Below is the verbatim transcript of the interview. Also watch the accompanying video. Q: What is India looking like from your perch at Morgan Stanley Smith Barney?
A: Right now, we have been underweight India because of two reasons. One is the monetary tightening and second is the price to book value versus price to book ratio is 3.3 times is on an expensive side in India. India on a short-term basis would be underweight.
We still have exposure, but we would be underweight versus a normal market rating. We are overweight in China, and underweight in Mexico, India and several other countries. India can eek out as the stock market is not expensive on a price to earnings basis.
The earnings growth is about 20% this year and will be another 12-15% next year. We like those earnings dynamics. In longer-term, we see a tremendously attractive growth story for India. Consumer markets, service economy, infrastructure developments, incredible demographic dynamic and structural positioning of India is in a very sweet spot.
In longer-term, Morgan Stanley has a tremendously positive view of India as an investment opportunity. There is a lot of good feeling, grasp and engagement by our investor base of India as a growth story in the intermediate and longer-term.
Our view on RBI