Morgan Stanley upgrades India to overweight, slashes China to equal weight

Morgan Stanley has upgraded India to 'Overweight' from 'Equal weight'. This comes as the brokerage firm believes that India is just at the start of a long wave boom given its relative valuations are 'less extreme' than in October and the nation’s reform and macro-stability agenda supports a strong capex and profit outlook.

Now, India has become the core overweight market for Morgan Stanley within the Asia Pacific Ex-Japan and Emerging Markets basket. On March 31, Morgan Stanley upgraded India from 'Underweight' to 'Equalweight' citing a narrowing valuation premium and a resilient economy.

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Meanwhile, Morgan Stanley has cut China's stocks to equal weight, saying investors should capitalise on a rally spurred by government stimulus pledges to take profits. It also added that growth and valuation concerns remain in China.

The brokerage firm said that both India and China are in stark contrast. With GDP per capita only $2,500 against $12,700 for China and positive demographic trends, India is arguably at the start of a long wave boom at the same time as China may be ending one, it said. The household debt-to-GDP ratio in India is just 19% while it is 48% for China.