Ridham Desai, Managing Director and Chief Equity Strategist at Morgan Stanley India, remains bullish on India even at a time when the domestic equity markets have faced consistent pressure and rampant selling from foreign investors.
In his latest India strategy note for Morgan Stanley, Desai has made a case for Indian equities entering a ‘defensive growth’ market phase, with earnings growth turning the corner after six consecutive quarters of mid-cycle slowdown. According to him, the setup is ideal and points to a strong year ahead for Indian stocks.
Desai adds that trade deal progress with the US and the UK, coupled with the thawing of relations with China, an undervalued rupee and strong domestic equity flows could be key tailwinds for the Indian market.
While sentiment and valuations are at near extremes, Desai believes the earnings acceleration in the pipeline justifies the optimism.
He does acknowledge geopolitical tension to be a fresh challenge, especially given India’s oil important dependence. However, he notes the economy’s oil intensity is significantly lower than it once was.
Ridham Desai went on to talk about his sector positioning, notably predicting IT services to emerge as a potential dark horse, as the world looks to accelerate its pivot towards AI applications and solutions. Indian IT companies, to that end, could be quiet beneficiaries that the market isn’t fully pricing in just yet.
Desai also favours domestic cyclicals over defensives and external-facing sectors. Financials, consumer discretionary and industrials are ‘overweight’. Energy, materials, utilities and healthcare are ‘underweight’.
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