In a significant development, Morgan Stanley, the Wall Street titan, has upgraded India’s market status to “standout overweight.” This upgrade is attributed to India’s promising economic and earnings growth, along with its robust macroeconomic stability in the face of a higher real interest rate environment.

According to a report by PTI, the brokerage note stated, “India remains standout overweight. We increase our overweight stance on Indian equities and as our most-preferred emerging market.”

Furthermore, Morgan Stanley acknowledged the continuous influx of domestic funds into the Indian market and the influence of multipolar global dynamics, which have been directing both Foreign Direct Investment (FDI) and portfolio investments toward India. In the global equity investment score, Indian equities occupy the top spot with an impressive overall score of 68.

In comparison, Singapore is in second place with a score of 54, followed by Greece at 47, Mexico at 43, and Poland at 38, comprising the top five markets for the company in the current year.

The report pointed out India’s remarkable outperformance compared to the MSCI Emerging Markets (EM) index from early 2021 until October 2022, registering a remarkable 45.5 percent outperformance in USD terms.

Morgan Stanley expressed optimism for India’s continued outperformance, anticipating a significant breakout in relative Earnings Per Share (EPS) compared to the broader EM market, along with lower correlation and revenue dependence on the United States and China.

Highlighting positive economic indicators, the report cited decreasing inflation concerns and an improving trade balance. With India’s CPI moderating to 5 percent and core CPI further slowing to 4.6 percent in September, the concerns regarding inflation-induced monetary policy fluctuations have eased. Additionally, India’s trade deficit has shrunk, and the service trade balance exhibited sequential improvements in September.

The report also noted that India has historically outperformed during EM bear markets, delivering an average return of nearly 8 percent each year since 1997.

Morgan Stanley’s positive outlook underscores India’s economic resilience and its attractiveness as a favored investment destination, solidifying its status as a standout market in the emerging world.

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