While reiterating the bullish view on India, Morgan Stanley India's Ridham Desai in the note cited factors that have helped India outperform in a period of global selloff, though the risk of testing 'multi-month low' remains, he added.
Morgan Stanley India's Ridham Desai has said that Indian equities are looking 'attractive', adding that the small and midcaps have now come out of their valuation excesses after a fall of over 20 percent from recent highs.
Although India's sensitivity to oil prices has decreased, a sudden significant increase in oil prices could still cause near-term pain, said Desai.
Desai sees fiscal consolidation accelerating under Modi 3.0, with the government's primary focus being macro stability and policy continuity.
When it comes to areas to bet on in the Indian market, Desai picked up domestic cyclicals like private banks, consumption and industrial names.
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Desai underscored the significant progress India has made on the international front, resulting in favorable outcomes for both the broader macroeconomic environment and the outlook for the market.
'India’s correlation with oil has been broken down in last eight years. Indian markets are not behaving badly, even though the US is facing a possible recession'
Despite a record rise in trading by retail investors over the past eight years, Indian households remain “dramatically” underweight in the asset class, with stocks comprising only 5%-6% share of their wealth, said Ridham Desai, managing director at Morgan Stanley India Company Pvt. Ltd.
The chosen sectors are at variance with bets by foreign portfolio investors and domestic institutional investors.
There are definitely risks on the horizon but the underlying trend remains bullish, says Desai. The vaccine programme as well as the mini-lockdown measures imposed in Maharashtra have helped to bring down cases.
"India’s financial system is not out of the woods yet. Banks are raising capital which is not at the top of the cycle. If banks don’t lend more, that will almost force borrowers to default," said Ridham Desai.
Desai pointed out that COVID-19 has evinced a very strong fiscal and monetary response the world over and it is quite unprecedented as the world has never seen such a response.
Over the next few months, Morgan Stanley expects MSCI to rebalance MSCI India weights to reflect this change.
According to Desai, there is no much scope for the government to increase revenues as the economy is not doing well, "So, you need to kick-start the economy. I think the government need to focus on that rather than on the social sector for now."
Ridham Desai & Sheela Rathi expect FPI flows to improve in 2019 after they turned net sellers in 2018
According to Desai, compounded Nifty earnings will be around 20 percent in the next 5 years.
What the past three bull markets teach us is that valuations are still not at levels that signal an end to the bull market.
According to the research house, Tata Steel, Dr Reddy's Labs and Tata Motors will likely see the fastest net profit growth, while Bharti Airtel, Sun Pharma and Lupin should be the laggards.
Many factors will contribute to push profit share to GDP which includes a recovery in consumption, real wages are turning, exports are picking up, and government infrastructure is at an all-time high.
Divi’s & Container Corp may be removed from MSCI India Index
Indian equity benchmarks rallied 9 percent since the start of the year 2017, backed by domestic fund flows and stable Q3 earnings & better-than-expected GDP despite demonetisation.
Speaking at a panel discussion during the Mission Prosperity launch event, Ridham Desai, Head of India Equity Research and India Equity Strategist at Morgan Stanley, said that if you are willing to give up your monthly salary, then mutual funds can make you as wealthy as Rakesh Jhunjhunwala.
Global brokerage firm Morgan Stanley on Thursday said it expects the Sensex to touch the 39,000-mark in a 'bull case' scenario by this December.
Ridham Desai of Morgan Stanley is overweight on consumer discretionary, financials, and technology and underweight on consumer staples, energy, materials and telecom.