Morgan Stanley Upgrades India Shares To Overweight; Downgrades China To Equal Weight

Brokerage firm Morgan Stanley has upgraded India to overweight making it a core market within the Asia Pacific Ex-Japan and Emerging Markets basket. This upgrade was as the brokerage firm believes that India is just at the start of a long wave boom as it considers the relative valuations less extreme. In addition Morgan Stanley also feels the nation's reform and micro stability agenda will support a strong capex and profit outlook.

This move comes four months after Morgan Stanley upgraded India to equal weight from underweight on citing a narrowing valuation premium and a resilient economy.

The brokerage also expects Sensex to reach 68,500 points by December and it expects the market index to trade at a trailing price-to-earnings multiple of 20.5 times which is slightly higher than the 25 year average of 20 times.

China downgrade

While the Morgan Stanley strategists believe India is at the start of a long wave boom, they also feel that China may be close to ending one. The brokerage in its report downgraded its rating on Chinese stocks asking investors to make profit and capitalize on the rally that is led by packages announced by the government.

Morgan Stanly strategists also believe that it could be a beginning of a new era of Indian outperformance in comparison to China.

Taiwan downgrade

The brokerage citing stretched valuations amid a rally in tech stocks also downgraded Taiwan to equal weight.