Here's Why India Is Morgan Stanley's Top Pick Among Emerging Markets
India's weightage has increased to 11% in the MSCI Asia Pacific Index in January 2024, compared to 6% in January 2021, the investment firm said.
India is Morgan Stanley's top pick in the MSCI Emerging Market Index as the country is expected to 'structurally outperform', driven by nominal GDP growth, a focus on capital expenditure, and a global de-risking trend.
The multipolar world trend is to aid FDI inflows in the country, while policy reforms and the macro-stability agenda of the government are to anchor capex growth as well as the profit outlook, the investment firm said in a note on Friday.
Valuation in Indian markets is at a premium due to strong fundamental reasons, Morgan Stanley said. "We see a secular trend towards sustained superior USD EPS growth versus EM over the cycle, with a young demographic profile supporting equity inflows."
The investment firm sees India as the best domestic demand opportunity among other emerging markets. The country's demographic trend is favourable due to the rise in the working-age population.
India's public capital expenditure has risen to a 19-year high of 3.3% of GDP in FY24, while private capex has entered an upcycle phase.
India's weightage has increased to 11% in the MSCI Asia Pacific Index in January 2024, compared to 6% in January 2021, the investment firm said.
Morgan Stanley expects India to be the key driver of global growth in the 2020 decade, with its share of global growth estimated to increase by 18% in 2024. The country is expected to become the third-largest economy by 2027.
Sector-wise, the investment firm expects the financial and industrial segments to be on a recovery path in the 2024 calendar year for India and Indonesia.
Reliance Industries Ltd. and Infosys Ltd. made it to Morgan Stanley's Top 20 in the MSCI All Country Asia Pacific Index.
The investment firm remains 'overweight' on Mexico, Poland, Greece, and Singapore.
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Key Takeaways
India is Morgan Stanley's Top Pick in the MSCI EM index.
The country's weightage has increased to 11% in the MSCI Asia Pacific Index in January 2024, the brokerage said.
Morgan Stanley expects India to structurally outperform its peers due to nominal GDP growth, a focus on capex growth, and a global de-risking trend.
Indian markets' valuations are at a premium, said the investment firm.
India is expected to be the key driver of global growth in the 2020s.