India gets ‘upgrade’, China sees ‘downgrade’ in Morgan Stanley ratings

New Delhi: Morgan Stanley, the American brokerage firm on Thursday upgraded India’s status to ‘equal-weight’ to ‘overweight’ while downgraded China’s ratings, on basis of its parameters assessing economic growth in both the Asian nations.

This comes as a big shot in the arm for India growth story, at a time when the world is increasing facing economic pressures & turmoil.

The upgrading of Indian economy while downgrading of Chinese one comes on back of ‘long boom phase’ starting off in India, the global brokerage firm said.

“India is arguably at the start of a long-boom at the same time as China may be ending one,” said Morgan Stanley in its report.

Remarkably, the same firm had, on March 31 this year, upgraded India’s ratings to ‘equal-weight from underweight’.

Why India got an upgrade

The US brokerage firm cited many reasons in uplifting India’s ratings. Among the many reasons, the slew of reforms and govt’s focus on macro-stability apparently strengthened India’s case.

Morgan Stanley report says that India was witnessing increased flow of Foreign Direct Investment (FDI) and the nation’s progressive steps towards reforms & macroeconomic stability would add to this trend.

India’s young demographic profile also adds to its advantage and is seen as a reason behind driving equity inflows. The brokerage firm said that nation’s potential for sustained USD EPS growth was higher as compared to other emerging markets.

Why China got downgraded

While uplifting India’s ratings, it downgraded China to ‘equal-weight’ and the reason behind this is probably investors’ decreasing interest in long-term interests in the country, given the repeated face-offs with US.

The report also suggests that investors should book profits and stay watchful, in wake of recently rally in Chinese markets, post govt stimulus package.

It says that Chinese govt may be rushing to rescue the economy but the endeavour & investments may not be enough to sustain the gains in stock markets.

Apart from China, Taiwan also got downgrade in Morgan Stanley report. The reason behind this could be overvalued tech sector in the country.