Opportunity to invest in India’s long-term growth story is now: Morgan Stanley

Global brokerage Morgan Stanley has reaffirmed its positive long-term outlook on Indian equities, highlighting that India is likely to outperform in a global bear market scenario.

According to a note by the brokerage, the opportunity to invest in India’s long-term structural growth story is now, though it will require patience, given the potential.

The global financial services major believes that while near-term volatility may persist, “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.

The macroeconomic environment remains challenging worldwide, with risks such as decelerating global growth, central bank policy shifts, and geopolitical tensions casting a shadow.

Morgan Stanley states 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.

Morgan Stanley also 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 its another report last month, Morgan Stanley said that India is one of their preferred equity markets where macro conditions are resilient or sufficiently buffered by stimulus.

The brokerage saw a relatively resilient outlook for financials earnings, with capital ratios and the asset quality outlook in a strong position across most of its coverage. “We particularly like Financials in Singapore, India, Chile and the UAE, as well as Japan,” it added.

Key India-specific catalysts include continuing dovish actions from the RBI, stimulus through GST rate cuts and a trade deal with the US. Morgan Stanley also sees lower food inflation and lower oil prices, keeping food and non-food inflation at benign levels.