India's earnings recovery is showing greater breadth, with Morgan Stanley turning more constructive on equities after a stronger-than-expected first-quarter performance. The brokerage said robust revenue growth translated into stronger earnings growth in Q1FY27, while margins held up better than anticipated despite input cost pressures.
Against this backdrop, Morgan Stanley has identified its best bottom-up stock ideas following the earnings season. The brokerage is overweight on Adani Ports, Divi's Laboratories, Eternal, Grasim, Hyundai, ICICI Bank, Leela and Titan.
On the other side, Morgan Stanley has an underweight stance on Bajaj Auto, Cipla, Dabur, Dalmia, Havells, SBI Cards and Wipro.
The brokerage said broad-market earnings growth continued to outpace that of the narrow market indices, while its medium-term earnings outlook has improved further. It expects the recovery to be supported by a cyclical upswing led by policy action.
Morgan Stanley's assessment comes as nearly two-thirds of the stocks in its coverage universe reported earnings growth during the quarter. Relative stock performance also improved across about half of its coverage universe, pointing to a broader recovery beyond a handful of index heavyweights.
Its Q1 coverage universe saw revenue, EBITDA and net profit growth exceed analyst expectations, while margin contraction was less severe than anticipated. More than 60% of companies covered by Morgan Stanley beat its estimates.
The brokerage also noted that earnings expectations have recovered from their lows. Its analysts and consensus now forecast FY28 Sensex earnings growth of 13.5% and 14.6%, respectively, compared with a top-down estimate of 16.3%.
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