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Morgan Stanley says Indian market's bull run is only getting started, here's why

Morgan Stanley sees further upside in the immediate 12 months but says the pace of gain may be slow.

June 22, 2021 / 11:35 AM IST
PG Electroplast | The company approved Rs 76.6 crore incoming investment from Baring Private Equity India, Ananta Capital and others.

PG Electroplast | The company approved Rs 76.6 crore incoming investment from Baring Private Equity India, Ananta Capital and others.

India's current bull market is mirroring the trend of the one in 2003-08 and may even have more legs, global financial firm Morgan Stanley has said in a report.

After hitting a high of above 15,900 in the previous week, the Nifty was trading around 15,600 in the afternoon, a fall of about 2 percent.

"The ongoing bull market compares well with history. If this bull market is reminiscent of that in 2003-08, as we think given a likely fresh earnings cycle, it has more legs to it," the report said.

India has outperformed emerging markets (EM) in each of the previous five bull markets with an average outperformance of 52 percent versus 23 percent for this bull market, Morgan Stanley said. It expects India to continue to outperform in the coming months as well.

"Given depressed earnings, P/B is a better metric than P/E for comparisons, in our view. The ongoing bull market started at a similar multiple as historically. The current P/B of 3.6 times compares with an average peak of 5.2 times," it said.


Morgan Stanley defines a bull market as when the index doubles from its trough. India has had six bull markets, including the present, over the past three decades.

"If we exclude the 2003-08 bull market, the average duration of the other four bull markets is 72 weeks, compared with 64 weeks for the ongoing one. Given our view of a likely new profit cycle, the 2003-08 bull market duration may be the template for the ongoing bull market," Morgan Stanley said.

Also Read: Bull market to continue, don't see a threat of COVID third wave: Rakesh Jhunjhunwala

It sees further upside in the immediate 12 months but believes the pace of gain may be slow.

"The average weekly return of 1.6 percent is still less than what we have seen in other bull markets and tells us that the apparently rapid pace of equity returns in the current bull market is nothing unique. The volatility of this weekly return at 3 percent is not different from history,” said Morgan Stanley.

For the coming year, its top picks are consumer discretionary, industrials and financials.

Consumer staples are underperforming, whereas materials, industrials and consumer discretionary (all cyclical) are the top three performing sectors.

The underperformance of financials is an outlier, usually a top three sector (could be due to composition changes), Morgan Stanley said.

Also Read: Don't invest in the US, Indian market in a long bull run: Rakesh Jhunjhunwala

"We are still in the early stages of the equity issuance cycle and they could rise anywhere between three to five times average market cap before this bull market ends," said Morgan Stanley.

Earlier in the day, in an interview to CNBC-TV18, renowned investor Rakesh Jhunjhunwala said India's bull market will continue and inflation was transitory.

"Investors should not be fearful of the market as a whole merely because of small corrections," he said.

Drawing a parallel with the 2004-08 bull market, Jhunjhunwala said the ongoing rally would last for decades.

Jhunjhunwla said he was bullish on the Indian market as the economy was going to see healthy growth.

"The economy is at a take-off stage. We went through an NPA cycle and we went through a lot of changes such as Jan Dhan, IBC, RERA, reforms in mining, labour and farm laws. Indian is on a threshold of good and long economic growth. The structural change that is happening in the Indian economy is coming to the fore," Jhunjhunwala said.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Nishant Kumar
first published: Jun 21, 2021 01:48 pm

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