Morgan Stanley Predicts New Highs for India, Lists Top 10 Picks to Ride the Rally

Morgan Stanley predicts India will reach new highs in the coming months, driven by fundamental reasons. The brokerage house is overweight on 10 stocks, including Jubilant FoodWorks, Maruti Suzuki India, and ICICI Bank. India is expected to gain share in global output, with robust population growth, a functioning democracy, and improving infrastructure. Morgan Stanley also has underweight ratings for utilities, energy, healthcare, and materials sectors.

Morgan Stanley has predicted that the Indian markets are poised for significant growth in the coming months, driven by a combination of fundamental factors. The brokerage house has released a report highlighting several key points that support this optimistic outlook.

One of the primary drivers of this forecast is India's expected rise in its share of global output. The report, co-authored by Ridham Desai and Nayant Parekh, notes that India's robust population growth, functioning democracy, stable macroeconomic policies, improved infrastructure, and a rising entrepreneurial class will contribute to this growth [1]. Additionally, the report predicts that India will undergo a major energy transition, with credit to GDP rising and manufacturing gaining a significant share in GDP. These factors are expected to make India the world's most sought-after consumer market.

The report also highlights the importance of lower inflation volatility and structural growth triggers in India. Lower inflation volatility, driven by both supply-side and policy changes, will likely result in lower interest rates and a higher price-to-earnings (P/E) ratio in the equity market. This, combined with the shift in household balance sheets towards equities, is expected to support sustained demand in the stock market [1].

Morgan Stanley has identified 10 stocks that are likely to perform well in the coming months. These include Jubilant FoodWorks, Maruti Suzuki India, and ICICI Bank. The brokerage house has also provided an overweight rating for these sectors, indicating their positive outlook. Conversely, the report suggests that utilities, energy, healthcare, and materials sectors may face underperformance [1].

In a separate report, Morgan Stanley has also noted that Chevron's acquisition of Hess is expected to strengthen the oil and gas company's business, growth, and portfolio duration. The deal is expected to be 3.5% accretive to 2026 free cash flow per share, boosting the 2025-2030 cash flow compound annual growth rate from 3% to 5% and free cash flow from 6% to 8% [2].

ICICI Bank has announced a significant change in its fee structure for UPI transactions processed by payment aggregators. Starting August 1, 2025, payment aggregators will be required to pay a transaction fee, aligning with a growing trend among Indian banks [3]. This move aims to recoup the infrastructure and processing costs incurred by the bank, which have been absorbed until now.

In conclusion, Morgan Stanley's optimistic outlook for the Indian markets is supported by a mix of fundamental factors, including robust population growth, stable macroeconomic policies, and improved infrastructure. The brokerage house has identified several key stocks and sectors that are likely to perform well in the coming months, while also noting areas of potential underperformance.

References:
[1] https://m.economictimes.com/markets/stocks/news/8-reasons-why-morgan-stanleys-ridham-desai-thinks-sensex-may-rally-10-to-89000-by-june-2026/articleshow/123095817.cms
[2] https://finance.yahoo.com/news/chevron-apos-hess-acquisition-spur-142108179.html
[3] https://www.thebridgechronicle.com/tech/icici-bank-upi-transaction-fee-payment-aggregators-august-2025