Markets could go up 20% from here: Morgan Stanley

Firm likes industrials, private sector banks, consumer discretionary stocks

A reversal of the earnings downcycle could help markets go up significantly from current levels, according to foreign financial services firm Morgan Stanley.

Ridham Desai, head of Indian Equity Research said that earnings could go up. Earnings revision is likely to turn after it has reached close to the worst levels in history, according to a report released during an investment summit in Mumbai.

Lower interest rates and policy reform, alongwith improving corporate balance sheets are a positive, according to Morgan Stanley.

Chetan Ahya, Co-Head of Global Economics and Chief Asia Economist said that emerging markets (EM) are facing a troubled growth outlook even as the developed market (DM) economies are doing better.

Commodity producers are unlikely to have a positive change in outlook. Other emerging markets such as China have overcapacity issues, said Ahya. There is a capex revival underway.

"There will be another year of divergence between EM and DM," he said.

India is likely to be a bright spot on the back of improving capex. 

Morgan Stanley believes industrials, private sector banks and consumer discretionary stocks will do well.