NewKerala.com

Indian Equities Poised for Strong Year on Earnings Growth and Policy Tailwinds

Indian equities are poised for a strong year due to acceleration in earnings growth and reflationary policies from the RBI, including rate cuts and liquidity infusion. Morgan Stanley forecasts the BSE Sensex could reach 89,000 by June 2027, implying a 15% upside. Analyst Ridham Desai favors domestic cyclicals, overweighting financials, consumer discretionary, and industrials, while underweighting energy and utilities. Despite challenges like oil imports and lack of AI plays, India is seen as a major beneficiary in a multi-polar world with rising manufacturing share.

Key Points: Indian Equities Poised for Strong Year on Earnings Growth

  • Earnings growth and reflationary RBI policies drive outlook
  • Morgan Stanley sees Sensex at 89,000 by June 2027
  • Overweight on financials, consumer discretionary, industrials
  • India benefits from multi-polar world and AI productivity gains
2 min read

Indian equities poised for strong year over earnings growth, policy tailwinds: Report

Indian equities set for strong year due to earnings growth, RBI policies, and tax cuts. Sensex could hit 89,000 by June 2027, says Morgan Stanley.

"IT services could be the dark horse as the world pivots to these companies to build AI applications - Ridham Desai"

New Delhi, May 13

Indian equities are set for a strong year ahead due to acceleration in earnings growth and reflationary policies of the RBI, along with policy moves such as rate cuts, bank deregulation and liquidity infusion, a report said on Wednesday.

The report from Morgan Stanley said strong capital expenditure in energy, defence, semiconductors, fertilisers and data centres along with large tax cuts are other factors likely to drive an earnings upswing.

The investment bank forecasted a reversal after a six‑quarter slowdown as valuations and sentiment sit near extremes.

The report predicted a base case scenario of BSE Sensex touching 89,000, implying upside of about 15 per cent through June 2027.

Trade deals with the US and the EU and thawing of China relations, along with stronger domestic equity flows and an undervalued currency on a real effective basis, also support the bullish outlook.

Ridham Desai, Equity Strategist, favoured domestic cyclicals over defensives and external‑facing sectors, and went overweight on financials, consumer discretionary and industrials.

Desai gave underweight calls on Energy, materials, utilities and healthcare. "We are capitalisation-agnostic. IT services could be the dark horse as the world pivots to these companies to build AI applications," he said.

The report predicted a 300 basis‑point upswing to consumer discretionary and industrials on expected consumption growth, helped by lower interest rates, the effect of lower taxes and better overall income growth.

It predicted 200 basis‑point upswing in financials as net interest margins are troughing along with strong credit growth and benign credit costs.

"While India's oil intensity is a lot lower than previously, it still needs to import oil. The lack of a direct AI play seems to be the most persistent challenge to the equity market, with potential AI disruption for Indian services exports aggravating matters," the report warned.

However, despite these challenges, the report predicted that India would be a big gainer in a multi-polar world, with manufacturing share in GDP likely to rise in the coming decade."

India is one of the fastest-growing places for energy infrastructure and this could fuel a boom in data centres, the report said, adding that due to the low starting point of labour productivity, India is a major beneficiary of AI-led productivity gains.

- IANS

Share this article:

Reader Comments

P
Priya S
The mention of AI disruption for Indian services exports is concerning. We've built our IT sector on outsourcing, and if AI eats that lunch, we need serious reskilling. But Ridham Desai calling IT services a "dark horse" is interesting - maybe we can pivot to building AI applications rather than just servicing old systems? 🤔
R
Rohit P
Great analysis from Morgan Stanley, but I think they're underestimating two things: 1) The impact of rising interest rates globally could trigger FII outflows, and 2) Domestic inflation might force RBI to hold back on rate cuts. Still, the capex push in energy, defence, and data centres is exactly what we need for sustained growth. Make in India is finally showing results!
J
James A
As an NRI following Indian markets closely, this is a compelling story. The combination of tax cuts, infrastructure spending, and favourable demographics is unique. But I'm puzzled by the underweight on healthcare - India's medical tourism and generic drug manufacturing should benefit from global supply chain shifts. Can someone explain this call?
S
Sarah B
The oil import dependency is a valid concern, but haven't we made progress on renewables? With solar and wind capacity booming, our oil intensity should keep falling. Also, the AI productivity argument is compelling - if we can leapfrog with AI-enabled services and manufacturing, India could truly shine.
K
Kavya N
One respectful criticism: These reports always talk about the market moving higher, but what about the common retail investor? The Sensex at 89K doesn't help if the average Indian can't afford to invest. We need policies

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50