In the face of growing global uncertainty, Morgan Stanley reaffirms its positive long-term outlook on Indian equities, highlighting that India is likely to outperform in a global bear market scenario but underperform in a global bull market. According to the brokerage, the opportunity to invest in India’s long-term structural growth story is now, though it will require patience, given the potential for external macroeconomic shocks.
While near-term volatility may persist, Morgan Stanley believes the long-term reward outweighs short-term noise. The firm advises investors to stay focused on India’s domestic growth story and selectively build exposure—particularly in domestically driven sectors—during periods of market stress.
Long-Term Opportunity Amid Global Volatility
The macroeconomic environment remains challenging worldwide, with risks such as decelerating global growth, central bank policy shifts, and geopolitical tensions casting a shadow. However, Morgan Stanley argues that these very conditions present a compelling case for India, supported by its robust domestic fundamentals and relative insulation from global volatility.
India offers a mix of macro stability, earnings growth, and a reliable domestic demand base that positions it as a relative safe haven in a bear market. That said, in a global bull phase where capital chases high-beta markets, India may lag due to its more stable and steady growth trajectory, rather than explosive returns.
Sector Strategy: Domestic Cyclicals in Focus
Morgan Stanley favours domestic cyclicals over defensives and globally exposed sectors. The firm holds an overweight view on financials, consumer discretionary and industrials, backed by improving credit growth, private investment recovery, and rising consumer demand.
In contrast, it is underweight on energy, materials, utilities and healthcare, which are more dependent on global trends and commodity cycles and less likely to benefit from India’s internal growth drivers.
A Market for Stock Pickers
Unlike the post-Covid period driven by macro themes, the current cycle is expected to favour stock-specific performance. Morgan Stanley sees this as a stock picker’s market, where fundamentals, execution, and management quality will be key drivers of outperformance.
Importantly, the strategy is capitalisation-agnostic, suggesting opportunities exist across large, mid, and small caps. With foreign positioning near historic lows and domestic participation still strong, the environment is ripe for selective long-term investing.
. Read more on Markets by NDTV Profit.While near-term volatility may persist, Morgan Stanley believes the long-term reward outweighs short-term noise. Read MoreMarkets, Business
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