Morgan Stanley sees India equity recovery as growth cycle turns

Morgan Stanley expects India’s stock market to rebound from its sharp underperformance since late 2024, saying a turning growth cycle and policy stimulus should drive a recovery. The bank described the market as entering a macro-driven phase, where broader economic trends matter more than stock selection, adding that it remains “capitalisation-agnostic.”

MS said the factors behind India’s lag — slower growth, stretched valuations, and the lack of AI-related plays — are now reversing. It expects a positive growth surprise in coming months, supported by RBI rate cuts, liquidity injections, fiscal capex front-loading, and GST reductions worth about ₹15 trillion, aimed largely at boosting consumption.

Morgan Stanley also cited a potential India–US trade deal, easing tensions with China, and policy reforms such as privatisation and bank deregulation as further tailwinds. It predicts an RBI rate cut this quarter, sees scope for upward earnings revisions, and expects improved foreign inflows as growth accelerates.