Morgan Stanley is bullish about India’s markets despite several worrying risks

In a vague report lacking in conviction, Morgan Stanley Asia Pacific is bullish on India, but doesn’t explain why it is bullish, despite sounding a very cautious tone

In a brief but somewhat vague report, Morgan Stanley Asia Pacific is bullish on India even though many risks remain. The report titled “The Trailer May Be Over” says, “Leading indicators for equity returns (real rates, earnings, liquidity, sentiment and valuations) are in good shape though global liquidity has tempered at the margin. The conviction level of market participants is constantly challenged, though, because confirmatory signals remain feeble. We are a buyer of this fall.” However, the report does not elaborate the reasons of being bullish. The overall tone of the report is cautionary and lacks conviction. Morgan Stanley mostly states the risks and concerns that could affect the Indian market. They worry about three things.

Firstly, since there is substantial FII (foreign institutional investment) ownership in Indian stocks (though it has been declining), there is a risk of a panic in case FIIs start selling off. The report says, high FII ownership and position especially in the context of any “risk off”. “Risk off” is a term used in the financial world which means global speculators who set short-term prices will switch to lower-risk instruments or asset classes or country. It means shifting capital from places perceived to have high risk to places where there is low risk. India, presumably, is in the “high risk” category. In an earlier report titled, “What If the Tide Goes Out?” Morgan Stanley had said India is a country of “moderate risk” in case the US Federal Reserve suddenly stops its quantitative easing (QE) program. It had said, “This performance is consistent with the conclusions from our global team’s recent report What If the Tide Goes Out?, dated 13 June 2013 which ranks emerging economies in the order of risk to a sudden stop in QE – India features as a country with moderate risk.”

Morgan Stanley further states, “(FII) positions and ownership have declined. Both may have a bit more to fall before one can say that their overhang has completely gone away.” The graph below illustrates how FIIs have been leaving India in the last six months. Well, Moneylife has found this to be a contrarian indicator. We found out that when FIIs sell heavily, it is usually a good time to buy. You can check an exclusive analysis of FII flows in three parts over here (Part I - , Part II -  and Part III - ).

The second risk, according to Morgan Stanley, is that the market is underestimating “tail risks”. It means that there is a possibility that something unforeseen could happen to the Indian markets, but no one knows what that is. Morgan Stanley feels this will happen, but doesn’t specify what the tail risks are. The graph below indicates that market is still “complacent about tail risks”, according to Morgan Stanley.

The last is the political risks that could make markets more volatile. However, many investors have already begun preparing for a volatile year leading up to the general elections, so this isn’t really a concern.

The fact is that current account deficit and the deterioration of the rupee, is a big concern. The report states, “While India has made progress with macro stability, the fact is that the current account deficit is still elevated making risk off events difficult to digest.”  Yet Morgan Stanley feels the leading indicators look good (refer to first paragraph) and is bullish on India.



ashwin bahl

4 years ago

Time will surely tell but if you see the state of affairs today there is nothing to be bullish about !

Suiketu Shah

4 years ago

Isnt MS the same company who has sold their wealth management division to Stanchart.

All Wealth Management companies or investment management companies in India and forever optimistic of the "Indian story" so that people are lured into misbuying into equities by them.

Turbulence ahead for equity, bonds and gold!

As the sharply falling rupee pushes a weak Indian economy into a turbulent patch, where are...

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RTI Judgement Series: PIO agreed to reconstruct 'lost' file using documents given by appellant

The Industries department at GNCTD lost the file related with allocation of a plot. The PIO agreed to reconstruct the file with help from documents provided by the appellant and share a copy of the complete file. This is the 123rd in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) in the Department of Industries at the Government of National Capital Territory of Delhi (GNCTD) to provide a copy of the reconstructed file of the appellant.


While giving this judgement on 29 July 2009, Shailesh Gandhi, the then Central Information Commissioner, said, “The PIO Pradeep Gupta will give a copy of the reconstructed file created by using papers and communications received by the appellant before 20 August 2009.”


New Delhi resident Manoj Kumar, on 17 October 2008, sought information regarding his file for allocating a plot of land from the PIO, under the Right to Information (RTI) Act. Here is the information he sought and the reply give by the PIO...


1. What is the present status of the applicant’s case? Please provide the applicant the latest computerized status as today with all illustrations. Earlier there used to be a status “R-7” Please explain the meaning it carries and what is the present position today?       

PIO's reply: As per present computerized status, status code for “reason of rejection” is “R7” & shown as “No documents/absent for hearing.”


2. When can the applicant inspect the file personally or through an authorized representative? Kindly fix a date and time as to when can the applicant inspect and to whom to report and to where in respect of case file No. 36838.        

PIO's reply: The original file is not traceable and hence it cannot be inspected.


3. The applicant may be permitted to get photocopies of all the orders passed or copies of any document within the case file under provisions of RTI Act.    

PIO's reply: In the absence of original file, photocopies of the orders/photocopies of the documents cannot be provided.


4. At this stage please specify the reasons categorically as to why the applicant below failed to get allotment of plot while he had completed all the formalities and deposited the earnest money required which is still with the department.

PIO's reply: The same as replied vide above para (1) above.


Not satisfied with the reply, Kumar filed his first appeal before the First Appellate Authority (FAA). He stated “The responsibility to maintain a file is that of the office of commissioner of Industries who was to ensure its safe custody. Who is responsible for this sorry state of affairs?”


In an order, the FAA said, “I agree with the appellant as the government documents can not be misplaced and responsibility for this loss should be fixed. Deputy commissioner (Industries) Pradeep Gupta is directed to conduct an enquiry into the matter to fix the responsibility for loss of file within 30 days and simultaneously, joint commissioner of industries -JCI (Relocation) would take steps to reconstruct the file from the authentic documents available with the appellant and other records available with the Industries Department and Delhi State Industrial and Infrastructure Development Corporation (DSIIDC).”


Kumar then approached the CIC with his second appeal. He said, “Since there was no response about the fate of the said application, I personally visited the office of Public Grievances Commission (PGC) and was told that under the provisions and as per latest amendments, the 2nd appeal lies before CIC.”


During the hearing before Mr Gandhi, the then CIC, the appellant (Kumar) shared his ‘sorry’ experience with the department. He stated, “I met the officers in 2000, when they told me that I have not appeared before them hence no plot can be allotted to me. I gave them a letter on 8 June 2000 asking to be allotted an industrial plot under the relocation scheme. Again on 10 July 2001, I gave a letter but got no reply. On 4 January 2002, I once gain gave a letter in which I pointed out that I had deposited Rs60,000 in 1996 for the allotment of the plot. I was informed that the file was not traceable. After this on many occasions I have given papers and obtained no results whatsoever.”


Kumar also showed the documents, including the correspondence he had with the industries department over the years. He also gave a copy of these papers to the PIO before the Commission.


The PIO stated that with help from these documents, he will be able to reconstruct the file (of Kumar).


While allowing the appeal, Mr Gandhi directed the PIO to give a copy of the reconstructed file to Kumar before 20 August 2009.




Decision No. CIC/SG/A/2009/001487/4312

Appeal No. CIC/SG/A/2009/001487



Appellant                                           : Manoj Kumar

                                                            New Delhi 110015


Respondent                                       : Pradeep Gupta

                                                            JCI(RL) & SPIO

                                                            Department of Industries, GNCTD.

                                                            O/o the Commissioner of Industries

                                                            Plot No. 419, FIE Patparganj, Delhi 110092


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