Morgan Stanley upgrades India’s rating, Cuts China’s

Morgan Stanley, a reputed brokerage firm, has upgraded India’s rating to ‘overweight’ stating that the country was poised for strong and sustained economic growth.

The up-gradation has come at a time when many of the countries in the developed world, including those in Europe, were facing a slowdown.

Interestingly Morgan Stanley has downgraded the rating of China, which has been kept in the category of ‘equal weight’.

This upgrade comes just four months after Morgan Stanley previously elevated India from 'underweight' to 'equal weight' on March 31st, citing factors such as reduced valuation premium and the resilient economy. Morgan said India has jumped from the sixth position to take the coveted first spot in its rankings.

“Relative valuations have become less extreme compared to last October, contributing to this meteoric rise,” the Morgan Stanley report said. The ongoing trend of a Multipolar World is driving foreign direct investment (FDI) and portfolio flows, and India's reform-oriented and macro-stable agenda strengthens its prospects for robust capital expenditure (capex) and profitability outlook, the brokerage firm said in its report.

Furthermore, the brokerage firm has also made specific sector upgrades for India, including industrials, financials, and consumer discretionary stocks, which are now rated as 'overweight'. It expects these sectors to be major beneficiaries of India's ongoing structural growth story.

Within its Asia-Pacific Ex-Japan focus list, Morgan Stanley has added Indian stocks like Larsen & Toubro and Maruti Suzuki, while removing Titan from the list. Both Larsen & Toubro and Maruti Suzuki have also been included in the GEM (Global Emerging Markets) focus list.

India now holds the core overweight position for Morgan Stanley within the Asia Pacific Ex-Japan and Emerging Markets category. Valuation premiums for India compared to Emerging Markets and China have moderated since their peak in the previous year, but they are beginning to rise again, enhancing India's attractiveness as an investment prospect.