India on path to gradual, uneven recovery: Morgan Stanley

Bank fixed deposit was the best performing asset in India, Morgan Stanley said in a research note, adding that the country is on a path to "gradual and uneven" recovery.

According to the global financial services firm, even as 2015 was a good year for the Indian macro economy, as measured by the four key parameters of GDP growth, inflation, current account balance and fiscal balance, this did not translate into "spectacular returns" for the stock markets.

In sharp contrast to 2014, when equities (BSE 100) gave a 32 per cent return to investors, the returns turned negative this year, down 6.4 per cent.

This is despite the fact that at the same time last year, expectations were high for a strong performance for equities in 2015 on hopes of a reform-oriented government and a V-shaped cyclical recovery in the economy.

Interestingly, bank fixed deposit was the best performing asset in India, outperforming equities, gold and property.

The global brokerage firm further noted that in the short term, macroeconomic fundamentals may not have a positive correlation with market returns.

The year 2015 was good for the Indian macro economy, but this did not translate into "spectacular returns" for the stock markets.

In comparison, almost nothing went right on the macro front in 2012, but it marked a great year with the markets (BSE 100) returning 30 per cent.

"India is on a path to gradual and uneven recovery and just because a calendar year has changed does not mean that reality will change", Morgan Stanley said.

On investment strategies, the brokerage said "one's investing style should be such that one should look for growth inflections that seem durable and look for high-quality stocks within those spaces".

The 30-share benchmark Sensex is currently hovering around the 26,000 level. The index has lost almost 1,500 points since December 31, 2014 when it stood at 27,499 points.

Meanwhile, the government recently lowered its economic growth forecast for 2015-16 to 7-7.5 per cent from 8.1-8.5 per cent.