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Morgan Stanley Bullish on India Stocks Post-Budget, Favours 3 Key Sectors

Global investment bank Morgan Stanley has reiterated a constructive view on Indian equities following the Union Budget. The bank maintains an overweight stance on the Financials, Consumer Discretionary, and Industrials sectors, which are poised to benefit from the budget's growth-supportive measures. The report highlights the budget's balance between supporting economic growth through capital expenditure and a focus on emerging sectors like semiconductors, while maintaining a gradual path of fiscal consolidation. This policy direction is expected to support medium-term earnings visibility, particularly in sectors linked to domestic demand and industrial expansion.

Key Points: Morgan Stanley Positive on Indian Equities After Budget

  • Overweight on Financials, Consumer Discretionary, Industrials
  • Budget signals tech-led growth shift
  • Supports growth while managing fiscal consolidation
  • Capex boost and AI focus to aid earnings
2 min read

Morgan Stanley positive on Indian stocks post budget, overweights Financials, Consumer Discretionary, Industrials

Morgan Stanley is constructive on Indian stocks, overweighting Financials, Consumer Discretionary & Industrials post-budget. Read the key takeaways.

"We remain constructive on Indian equities - Overweight Financials, Consumer Discretionary and Industrials - Morgan Stanley Report"

New Delhi, February 2

Global investment bank Morgan Stanley has reiterated a constructive view on Indian equities following the Union Budget, placing an overweight stance on Financials, Consumer Discretionary and Industrials, according to its latest report.

The report said the Budget sends a strong signal on the government's future growth priorities, with the speech almost beginning with a reference to semiconductors. This, Morgan Stanley noted, reflects a major shift in the government's approach towards technology-led growth and advanced manufacturing.

It stated, "We remain constructive on Indian equities - Overweight Financials, Consumer Discretionary and Industrials"

According to the report, these sectors are well placed to benefit from the Budget's emphasis on growth-supportive measures and capital spending.

Morgan Stanley expects a likely boost to capital expenditure, continued growth in the services sector and increasing focus on artificial intelligence. These factors, along with a slightly slower-than-expected pace of fiscal consolidation, are expected to support earnings growth in F2027.

The report also highlighted that increased demand for equities through buybacks could further aid earnings.

The report observed that the Budget strikes a balance between reducing the debt-to-GDP ratio and maintaining a gradual pace of fiscal consolidation, while still supporting economic growth through both cyclical and structural measures.

Morgan Stanley noted that this approach helps sustain growth momentum without putting excessive pressure on fiscal stability.

The Budget has targeted a fiscal deficit of 4.3 per cent of GDP for F27, which is broadly in line with Morgan Stanley's estimate of 4.2 per cent of GDP.

The report said this fiscal path is consistent with a central government debt-to-GDP ratio of 55.6 per cent in F27, reflecting continued efforts towards fiscal discipline.

Morgan Stanley added that the combination of growth-oriented policies, support for emerging sectors such as semiconductors and AI, and manageable fiscal consolidation creates a favourable environment for equities.

The investment bank believes that the Budget's policy direction could support medium-term earnings visibility, particularly in sectors linked to domestic demand, financial intermediation and industrial expansion.

Overall, the report highlighted that the Budget reinforces Morgan Stanley's positive stance on Indian equities, with Financials, Consumer Discretionary and Industrials remaining key beneficiaries of the government's growth strategy and fiscal approach.

- ANI

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Reader Comments

S
Sarah B
As an investor, this analysis is gold. Morgan Stanley's call aligns with what I've been seeing on the ground. Consumer discretionary is a no-brainer with rising incomes. But I hope the fiscal discipline they mention is real and doesn't get derailed by populist measures later.
P
Priya S
Good to see global confidence, but what about job creation in these sectors? "Advanced manufacturing" sounds great, but we need to ensure it translates to quality employment for our massive youth population. The budget must walk the talk on skilling initiatives.
R
Rohit P
Finally some sense! For years, we've been importing chips. A push for domestic semiconductor fabrication is a strategic masterstroke. This, combined with capex in industrials, can make us a true manufacturing hub, not just an assembly line. Jai Hind!
M
Michael C
The report is optimistic, but a word of caution. The fiscal deficit target, while improved, is still high. Any global shock could pressure this balance. Retail investors should diversify and not put all eggs in these three baskets, no matter how promising they seem.
K
Kavya N
As a small business owner in consumer goods, this gives me hope. If financials get a boost, credit flow to MSMEs should improve. And more disposable income means people will spend on discretionary items. A virtuous cycle if executed well! 👍

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