New Delhi, June 2: Despite underperforming compared to emerging markets, the Indian stock market is set for robust growth in the future, according to a report from Morgan Stanley.
The report highlights that improvements in earnings, increasing investments, and favorable macroeconomic conditions are supporting the long-term outlook for domestic markets.
In a strategic note, analysts Ridham Desai and Nayanth Parekh from Morgan Stanley pointed out that Indian stock markets have experienced their weakest performance in the last 12 months compared to their emerging market counterparts.
However, the brokerage firm believes that the market foundation remains strong, and significant returns could be anticipated for the remainder of the decade.
The report identifies low exposure to AI as one of the biggest challenges for Indian stock markets, especially as global capital flows are rapidly shifting towards AI infrastructure, semiconductors, and technology-centric markets.
Morgan Stanley also expressed concerns about the potential disruption that AI may cause to India’s IT outsourcing industry, which is closely linked to global technology spending trends.
Nevertheless, the brokerage firm noted that due to relatively low labor productivity in India, the country could ultimately emerge as a significant beneficiary of AI-driven productivity gains.
The report states that Indian IT service companies could prove to be “unexpected talents” as global firms increasingly rely on them to develop AI applications and solutions.
Despite the relatively weak performance of Indian stocks, Morgan Stanley has highlighted several positive indicators that are beginning to emerge.
The brokerage firm reported that the 12-month rolling corporate buyback records are nearing all-time highs and could soon surpass $10 billion on a trailing basis.
Valuations have also become more reasonable. The MSCI India is currently trading at a price-to-book multiple of 3.4, which, according to Morgan Stanley, aligns with a historically estimated forward annual return of approximately 11% over the next decade.
Leave a Comment