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Indian Stock Markets are Under Pressure by Global Trends: Morgan Stanley

SMEStreet Edit Desk

17 Jul 2018 02:43 IST

New Update

morgan stanley, RBI, Reserve Bank of India, MPC

The Sensex may have hit all-time high last week, but the broader markets have hardly contributed to the rally. Amid ongoing market conditions, global brokerage Morgan Stanley believes Indian stock market is facing pressure from negative trend in emerging markets, rising interest rates, and higher oil prices at a time when electoral uncertainty looms large with general elections 2019 not so far. However, it noted that the large-cap index has support from an improving growth cycle, strong macro stability and local appetite for equities.

According to the global brokerage, following are the factors that may work in favour or against Indian equity market:

Strong macro stability evident in a positive BoP and backed by a Central Bank that is committed to keeping real rates positive.

A bullish steepening of yield curve, which is at post-2010 highs – the yield curve correlates positively with stocks.

A low and falling beta, which augurs well in a weak global equity market environment as we have seen over the past few weeks.

India's growth is likely accelerating relative to EM. Our work shows that corporate confidence is at a multiyear high and profits are likely to mean revert from below trend.

Strong domestic flows, currently averaging around US$2-2.5 billion a month, which we believe are in a structural uptrend.

Weaker FPI positioning, now at 2011 levels.

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