Corporate earnings are likely to see mid- to high-teens earnings growth in the next 3-5 years. Despite the selling pressure seen in the markets over the past few months, Morgan Stanley believes that buying into Indian equities will prove rewarding if global cues don’t surprise negatively. Once the correction comes to an end, Indian markets could likely resume their outperformance to the emerging markets pack, which will likely be in the coming months, the brokerage said. The ongoing correction has reduced India’s beta compared to other EMs to ~0.4, which explains the market’s rich headline multiple. The recent price decline has occurred on falling trading volumes, suggesting a lack of buyers rather than aggressive selling. The breadth of India’s income pyramid lends itself to momentum in consumer spending, which is likely to benefit as India has crossed the crucial $2,000 per-capita GDP level. This income level signifies a rising share of discretionary spending. The brokerage had reiterated its views, saying a slowdown in growth has unnerved investors, but it believes a recovery is on the horizon. The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management.
