Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Asset Management are among a number of prominent names talking up prospects for the country’s shares in recent days. India traders marked Diwali, the Hindu festival of lights, by watching the
Index rally to record highs last week, helped in part by a solid third-quarter earnings season.
About 86% of reporting firms in the benchmark posted a sales beat while more than 70% topped earnings expectations, according to data compiled by Bloomberg. The benchmark is up 10% this month and has narrowed its year-to-date underperformance against the MSCI Asia Pacific Index to about 5 percentage points from over 10 percentage points earlier this year.
After World’s Biggest Lockdown, Profits in India Are Rebounding
“India’s earnings revisions trend has improved sharply and valuations are on the cheaper side of their historical relationship with Asia and emerging markets,” Morgan Stanley strategists including Jonathan Garner wrote in a Nov. 15 note. The firm upgraded its recommendation for the MSCI India Index to overweight, naming it one of the top trades for their 2021 outlook.
India’s economy will benefit from easy global financial conditions as well as increased foreign direct investment following broad structural reforms delivered through 2020, according to the strategists.
Goldman Sachs strategists have also upgraded Indian stocks
to overweight, with the market seen as the most sensitive to vaccine optimism. The firm had cut their recommendation to market weight in April amid a nationwide shutdown and rising infections.
“The investment case for India has improved now,” a team including Timothy Moe wrote in a note last week. “We expect a ‘catch up’ laggard rally given the positive newsflow on the vaccine front, which could spur a faster than expected recovery.”
Goldman forecasts real economic growth to bounce back strongly over the next two years, fueling a corporate profits rebound of 27% in 2021 that’s ahead of its projected 23% increase for the MSCI Asia Pacific ex-Japan Index.
The team expects the NSE Nifty 50 Index to hit 14,100 by the end of next year, implying about 10% upside from last week’s close.
Looking further ahead, JPMorgan Asset Management projects strong long-term average annualized returns for Indian stocks
of 8.9% over the next 10-to-15 years.
“We see broad potential in India from a macro perspective,” said Sylvia Sheng, global strategist with the firm’s multi-asset solutions team in a press briefing last week. Bullish factors include population growth as well as room for productivity to grow, she said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.