Indian equity market investors must brace for increased volatility in the run-up to the Lok Sabha elections 2019, according to Morgan Stanley’s Head of India Equity Research and India Equity Strategist Ridham Desai.
“The markets are not going to be at all calm about elections. They are going to be all over the place,” he said at a media event to mark Morgan Stanley’s 25th anniversary in India.
Desai said the market has not yet factored in the outcome of the general elections in 2019 but investors will start taking action from early December once the outcome of the forthcoming state polls is clear.
“The market has still not priced in the election's outcome. I feel it will start doing that in the first week of December...market participants believe the state elections results would give them some perspective about the general election results," he said.
He believes December 11 will be an important date in setting market expectations. Counting for the state elections begins on December 11
He said, “That’s when we will know what the market has started believing about 2019 (election outcome), whether it’s going to be a single-party government, or it's going to be a coalition government…” he said.
The brokerage also expects a resurgence in private capex cycle after the elections as the capacity utilisation levels have gone up of late. Desai said in the next 12 months there should be a revival.
In Morgan Stanley’s 25 Years: Retrospective and Prospective Report, the foreign brokerage house noted that in the medium to long run, the confluence of demographics, productivity and globalisation will be supportive of a higher productivity growth rate.
The brokerage firm expects India to grow around 7 percent on average over the next 10 years with investment, exports and consumption contributing to growth. With a bullish view on India, Morgan Stanley expects India to be one of the high-growth economies among large countries over the medium term.
Over the long run, Desai is betting on finance companies and consumer discretionary stocks.
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