Morgan Stanley says that macros are now turning positive. Market sentiment is bound to improve with expectations of a normal monsoon, rate cuts and the passing of the GST Bill in FY17.

Moneycontrol Bureau



Global investment bank Morgan Stanley has upgraded its outlook on India to ‘overweight’ from an ‘equal weight’ rating. While the bank hasn’t given any target for the index, it says that certain key events will help boost market sentiments.



The bank believes that India is becoming a low-beta market within the emerging market basket. India’s relative valuations and positioning amongst fund managers have come off from its record highs, the report says.



Also, the bank sees lesser rich valuations and less crowded positioning for India. Attractive dividend yields on the back of rising dividends per share are another reason for the rating upgrade.



This dividend improvement, the report says, is mainly due to improving corporate balance sheet.



Besides dividend, Morgan Stanley says that macros are now turning positive. The bank expects atleast a 50 basis points rate cut during the year.



A higher probability of Goods & Services Tax (GST) getting passed this year and expectations of normal monsoon are big catalysts for Indian equities, mentions the report.



The bank expects a 3 percent earnings growth in FY16 and 14 percent growth in FY17.