Good news: M&S upgrades India, downgrades the US, and China
Virendra Pandit
New Delhi: Investment banking and brokerage firm Morgan Stanley has upgraded its views on India’s markets from “equal weight” earlier to “overweight” now as it believes the South Asian nation’s reform and macro-stability agenda supports a strong capital expenditure (capex) and profit outlook.
An overweight rating means that S&P expects India’s economy to perform better in the future. The upgrade comes against the backdrop of the US losing its AAA status and the ongoing economic slowdown in China.
India’s macro indicators remain resilient, and its economy is on track to achieve the 6.2 percent GDP forecast. India, it said, is now the top-ranked, most-preferred market among emerging markets (EMs), rising from the sixth spot, because of supportive foreign inflows, macro stability and positive earnings outlook.
“India rises from 6 to 1 in our process, with relative valuations less extreme than in October, and India’s ability to leverage multipolar world dynamics is a significant advantage,” M&S analysts said.
The firm also cut its rating on Chinese stocks to “equal weight,” saying investors should capitalize on a rally spurred by government stimulus pledges to take profits.
“India is arguably at the start of a long wave boom at the same time as China may be ending one,” the report predicted.
“We think returning India to an ‘overweight’ rating and downgrading China to ‘equal weight’ is warranted.”
The Chinese assets got a boost recently amid a slew of promises from Beijing to spur growth and revitalize the nation’s flagging private sector. But easing measures might come piecemeal, which may not be enough for shares to sustain gains.
The latest upgrade comes just months after Morgan Stanley moved India up from underweight to equal weight, citing its resilient economy
