Morgan Stanley: Indian stocks poised for revival, global trends hold the key

Indian equities to witness a rebound, with global factors playing a pivotal role, according to Morgan Stanley.

In its latest analysis, the brokerage emphasized that while predicting market bottoms is difficult, investing in Indian stocks at current levels could be rewarding. The nation is emerging from a phase of slow growth, aided by improving global conditions. The NSE Nifty 50 and BSE Sensex have dropped 13.3% and 11.7%, respectively, from their previous peaks, presenting attractive valuations.

Morgan Stanley highlighted that India's Union Budget is growth-oriented, with rising capital expenditure and reduced subsidies. Additionally, the Reserve Bank of India's rate cuts and liquidity measures are expected to bolster market sentiment. Recent tax reforms are also likely to encourage foreign direct investment.

Falling crude oil prices, improving geopolitical conditions, and a weaker dollar further support India's investment appeal. The brokerage predicts that India will regain its outperformance among emerging markets, provided there are no adverse global surprises.

Strong macroeconomic stability, favorable trade conditions, and projected mid- to high-teen earnings growth over the next three to five years remain key drivers for upside potential. Meanwhile, domestic policy is expected to stay supportive, with additional measures likely if economic risks arise.