Now, it’s Morgan Stanley’s turn to downgrade India equities

KS Badri Narayanan Chennai | Updated on October 28, 2021

Nomura, UBS too demote domestic markets citing overvaluations

Morgan Stanley has downgraded ‘overheated’ Indian stock markets to ‘Equalweight’ from ‘Overweight’ despite remaining positive on the country’s growth story.

“We move tactically EW on India equities after strong relative gains – we expect a structural multi-year earnings recovery, but at 24x fwd P/E we look for some consolidation ahead of Fed tapering, an RBI hike in February and higher energy costs,” said Morgan Stanley.

Amidst ASEAN reopening and supply chain recovery, the global advisory shifts market preferences. “We take profits on our India OW, but remain structurally positive, while also lowering Brazil to EW despite value,” it said. It has also upgraded Indonesia and raised its EEMEA allocation further, while staying EW on China and UW on Taiwan.

Downgrade by Nomura

Similarly, earlier this week, Nomura too downgraded Indian stocks to ‘Neutral’ citing unfavourable risk-reward given high valuations, as a number of positives appear to be priced in, while headwinds are emerging.

“Even on two-year forward price-to earnings (PE) basis (incorporating India’s strong earnings outlook), India is trading at record high elevated premium relative to regional markets,” said Nomura analysts.

In a report on October 20, UBS analysts too downgraded Indian equities saying India as “extraordinarily costly”.

Published on October 28, 2021

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