Morgan Stanley cuts its India overweight to 50 bps, citing weak earnings

Going ahead, it sees the impact of higher oil prices and the prospect of a higher deficit as obstacles for the market index

Morgan Stanley has reduced its overweight stance on India in its portfolio to 50 basis points (bps) from 150 bps earlier, citing disappointment in earnings. Going ahead, it sees the impact of higher oil prices, the election calendar and the prospect of a higher deficit as obstacles for the market index.

“We cut our overweight in India to 50 bps, after disappointing earnings season and slowing revisions breadth. Quantitatively, India ranks well on a fundamental basis (strategist and stock analyst views), but valuations are not particularly cheap (especially on a price-to-earnings basis); and earnings estimate revisions, while near record highs for India, are now lower relative to regional peers,” Morgan Stanley said in a note.

Besides India, it remains overweight on Thailand (increased by 50 bps to 150 bps now), China, Brazil, Singapore and New Zealand. At the global level, the research and brokerage firm has upgraded Singapore to overweight (from equal weight) and Peru to equal weight (from underweight).