Though Morgan Stanley remains overweight on Indian equity markets, it has reduced its exposure to 50 basis points compared with 150 bps earlier due to earnings miss on one hand and high valuation on the other.

“Quantitatively, India ranks well on a fundamental basis but valuations are not particularly cheap (especially on a P/E basis), and earnings estimate revisions, while near record highs for India, are now lower relative to regional peers,” Morgan Stanley said in a note.

The foreign brokerage firm is less bullish on India now as it is disappointed with the performance of India Inc in Q3FY18, which was weighed down by public sector banks and oil companies.

Ridham Desai, Managing Director, Morgan Stanley India, sees impact of higher oil prices, election calendar and prospects of higher deficit as obstacles for the market index.

MSCI India is down 5.5 per cent year to date in dollar terms, pointed out Morgan Stanley. Today, Nifty fell as low as 0.9 per cent intraday but has recovered with a loss of 0.6 per cent.

After giving spectacular returns of 25 per cent plus in 2017, Indian equity market has been flattish in 2018 till date. India has 6.1 per cent weight in MSCI emerging market/Asia Pacific ex-Japan portfolio.

According to Morgan Stanley, Tech Mahindra, GAIL (India), Cipla and Tata Power Company are the stocks worth buying as it believes they are not expensive and have a high safety score.

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