Morgan Stanley turns overweight on Indian market, downgrades other EMs
NEW DELHI: Despite a couple of hiccups faced by the domestic equity market in November in the form of demonetisation and strong outflow of foreign exchange and expectation of a December rate hike by the US Federal Reserve, global financial services firm Morgan Stanley has largest overweight on India among emerging markets and believes the impact of demonetisation has been factored in by now. Among specific stocks, Morgan Stanley is overweight on HDFC Bank, L&T, Tata Motors and UPL. However, the global financial services company is underweight on Australia, South Africa, Singapore, Malaysia, Thailand and Qatar.Taiwan, Peru, Chile and Czech Republic are among the other countries on which Morgan Stanley is overweight. The foreign brokerage has also upgraded Japan from underweight to overweight and forecast Topix at 1,800 by December 2017. Ridham Desai of Morgan Stanely believes equity returns in India would head higher in 2017. "The current low return environment that India seems to be trapped in may get a breather in 2017 thanks to better equity valuations and bottoming out of the growth cycle, which got disrupted temporarily by the demonetisation and due to its higher correlations with world equities on which we are more constructive," he said. Since the beginning of November 2016, the benchmark BSE Sensex has lost nearly 6 per cent to 26,316 till November 25. The index was at 27,930 on October 30. Several global brokerages have cut Sensex targets after the demonetisation drive. Deutsche Bank has slashed December 2017 Sensex target to 25,000 from 27,000. Maybank Kim Eng Securities said the domestic equity indices can fall 5-10 per cent further if the expected gains from demonetisation turn out to be less meaningful after December 30.