Morgan Stanley's Ridham Desai Bullish On India's Growth Story: 'D-Street Underestimating GDP...'

At a time when Indian markets have been wrought by cautious sentiment and geopolitical uncertainty, Morgan Stanley's Ridham Desai maintains confidence in India's growth story. In his latest note, Desai has pointed out that the markets may be underestimating the likely turn in India's growth cycle, especially after less-than-ideal corporate earnings in Q1.

This comes on the back of an underwhelming Q1, that saw Nifty registering an earnings growth of only 3% year-on-year, which was well below projections. Desai believes that one must maintain confidence in Indian markets and that the earnings peak is just around the corner.

In fact, he expects the earnings slowdown trend, which started in the second quarter of FY25, coming to an end, though the markets remain far from convinced. Morgan Stanley, for its part, remains confident in India's growth story and believes there is a strong case for re-rating.

The Morgan Stanley Chief India Equity Analyst further believes that India is likely to gain share in global output in the coming decades, even as short-term prospects get hampered by Trump tariffs and complications in trade talks between India and the United States.

"This is a stockpickers' market," says Ridham Desai, who is bullish on domestic cyclicals and favours the pack, ahead of defensives and external facing sectors. Morgan Stanley is also overweight on financials, even though credit growth has largely painted a grim picture in the June quarter.

Consumer discretionary and industrials are the other overweights for Morgan Stanley in equity markets. In terms of underweights, Morgan Stanley expects energy, materials, utilities and healthcare to underperform in the near future.