Mumbai: Global brokerage Morgan Stanley has said that Indian stocks could see a revival soon but global factors will be the key.
In its latest note, analysts at Morgan Stanley said that while catching the bottom is difficult, “we think buying Indian equities could prove rewarding.”
India is coming out of its slow growth patch of the past few months, the brokerage said, adding that the global news has turned better.
Stocks are now cheaper than they have been since the Covid-19 bottom.
The benchmark NSE Nifty 50 and the BSE Sensex have fallen 13.3 per cent and 11.7 per cent, respectively, from the previous peak.
According to the ace financial institution, the Union Budget is good for growth, with rising capex and falling subsidy expenditure.
The Reserve Bank of India’s rate cut and liquidity commitment will also be a boost. A slew of tax reforms that India has initiated should enthuse foreign direct investments into India, said the note.
Crude oil prices have weakened, and geopolitics are looking better with a likely fading of wars. “The dollar has corrected, and India’s real effective exchange rate has declined,” according to the note.
India should resume its outperformance to emerging markets in the coming months, Morgan Stanley said, adding that this is “subject to global cues not surprising negatively”.
Strong macro stability with improving terms of trade, mid- to high-teen earnings growth annually over the next three to five years and a reliable source of domestic risk capital are key fundamentals for upside.
Another report by the global brokerage last week said the direct impact of reciprocal tariff hikes by the US will likely be manageable but, the indirect impact through uncertainty weighing on business confidence is more worrisome.
However, domestic policy will likely remain supportive of growth and incrementally more measures will be taken if downside risks emerge, it maintained.