US investment bank Morgan Stanley on October 20 underscored India’s growing economic strength by upgrading India to “standout overweight.” The status is based on the country’s improving relative economic and earnings growth and the strength of the macro-stability set-up, which looks sufficient to withstand the higher real rate environment.
The “dream” run of domestic flows continues and multipolar world dynamics are driving both FDI as well as portfolio flows towards the country, it said. Domestic equities top the brokerage’s global equity investment score with an overall score of 68. In the list of top five markets this year, Singapore is second after India with the score of 54; Greece is at 47, Mexico at 43, and Poland at 38.
India has been structurally outperforming MSCI EM index by 45.5% (in USD terms) from early 2021 until October 2022. Morgan Stanley expects this outperformance to continue, “with India starting to show a material breakout in relative EPS versus EM and having relatively low correlation/revenue from both the US and China.”
Morgan Stanley said that the recent high-frequency trends also support its bullish stance with inflation concerns abating and the trade balance improving, adding that other than India only Japan has an overweight stance in Asia.