Getting ready for India's next bull market: Morgan Stanley

Indian stocks are exhibiting early signs of a bull market, Morgan Stanley argues in a note dated on Friday, though they are not quite there yet.

The US investment bank believes three conditions will be critical: a bullish steepening of the Indian yield curve, expanding profit margins and attractive valuations.

Of these, Morgan Stanley says the spread between the 10-year bond yield and the 91-day treasury-bill is already reversing its steep inversion, while it sees stock valuations as "attractive."

Profit growth is also in "a period of mild recovery," Morgan Stanley adds, though it does not believe "a full-blown margin expansion cycle is on hand."

"We believe that the market is preparing itself for the next big bull market, though we are not quite there yet," Morgan Stanley wrote.