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Morgan Stanley overweight on India; Sensex target at 55,000

Updated : July 20, 2021 10:03:44 IST

Morgan Stanley does not expect foreign institutional investor (FII) flows to impact Indian equities, Jonathan Garner, chief Asia & emerging markets equity strategist, told CNBC-TV18.

“We are starting to see outflows more generally from global emerging market funds. I should say at the outset that we are running a small overweight on India, so it’s not one of the markets that we are more concerned about; domestic liquidity conditions remain quite favourable in the Indian market and it’s not particularly expensive. So, we do have a modest upside to the Sensex target. Therefore, I wouldn’t expect India to bear the brunt of outflows,” he said.

“For emerging markets, we are quite close to our base case target now; there is 1-2 percent downside and as I said, the Sensex target of 55,000 gives us modest mid-single-digit upside. So, there is enough there to be positive on India within EMs, and we also like Singapore within the Association of Southeast Asian Nations (ASEAN) group and we like Australia,” he mentioned.

On emerging markets, Garner said, “We have not been bullish on emerging markets for a considerable time but we did cut our target prices further about ten days ago. There is a difficult cocktail of issues; one of which is the delta variant (COVID-19), but also the tightening of financial conditions in China is very important for the region’s growth.”

“Across Asia, we have not really had a fully-fledged consumer recovery since COVID began. The strength has been in traded goods sectors and manufactured goods exports. The trouble there, however, is that those stocks which are in the north Asia part of our coverage are extremely fully valued because that part of the world economy has done well for a considerable time,” he said.

The stocks on Wall Street fell as much as 2 percent on Monday, July 19, with the Dow posting its worst day in nine months, as a rise in worldwide coronavirus cases and increasing US deaths drove investors out of risky assets, crushing bond yields and share prices.

On global markets, Garner said, “The effects of the pandemic will be long-lasting, high levels of debt, adverse demography, quite weak productivity growth and fundamentally, structurally disinflationary; and the near-term issue is delta variant.”

For the entire interview, watch the video
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