Mumbai: The Indian equity markets are expected to outperform their emerging market peers over the next 12-18 months, but could see a short-term correction in the near term on global growth concerns.
“We are not positive on global markets as they are growing faster and policy makers have limited tools to address these concerns. We are expecting a correction in global stocks over the next 4-6 months in which India may also see some selling. This could cap a major upside for Indian equities,” said Ridham Desai, head of India equity research and India Equity Strategist.
Addressing the media on the sidelines of Morgan Stanley’s 18th Annual India Summit, Mr Desai said the corporate debt cycle has peaked out for India Inc and free cash flow has turned positive.
“Barring banks, this was the best earnings quarter (January-March) we have seen for India Inc since the Modi government came to power two years back.
Overall, the earnings cycle has troughed out and we can expect double digit earnings growth in next 12 months,” he said.
While Indian equities are trading at a higher valuations compared to emerging markets, Morgan Stanley believes India would still outperform because of its superior growth prospects. Morgan Stanley is very bullish on consumer discretionary stocks and expects them to do well over the next 12-18 months.
