Morgan Stanley upgrades India’s rating to ‘overweight’, downgrades China
Morgan Stanley
Brokerage firm Morgan Stanley on Wednesday updated India’s rating to ‘overweight’, saying that the country is at the start of a long wave boom. The firm added that supportive foreign inflows, macro stability and positive earnings outlook will help India outperform China, which has been downgraded to 'equal weight'.
In simple words, an 'overweight' rating indicates that the brokerage firm anticipates India to do better in the future.
According to the brokerage firm, India is now the top ranked, most-preferred market among emerging markets (EMs), rising from the sixth position.
The latest upgrade comes just four months after the firm raised India from 'underweight' to 'equal weight', citing a decline in valuation premium and a stable economy.
Within the Asia Pacific basket, India hasnow replaced Japan as the primary 'overweight' market for Morgan Stanley.
“We upgrade India to overweight for secular leadership. We see a secular trend towards sustained superior USD Earnings Per Sharegrowth versus Emerging Markets over the cycle," the note read. It added thata young demographic profile is supporting equity inflows into India.
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The Morgan Stanley note added that India’s future resembles China’s history to a large extent. In comparison to India’s 6.5 per cent GDP growth, the brokerage anticipates China’s GDP to expand by only 3.9 per cent by the end of the decade.
"We think returning India to an 'overweight' rating and downgrading China to 'equal weight'is warranted," analysts said. They were referring to the Indian markets' outperformance over China as a sign of a structural breakout in favour of India.
(With inputs from Reuters)
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