India recently reported by Morgan Stanley says there is a 'turning tide' at last in the stagnant Indian stock market. It argues that despite recognizing recent malaises of the Indian market, these reports come accompanied by a list of pointers indicating resurgence.
The report claims the latest growth slowdown has unnerved investors, but Morgan Stanley is convinced that growth is expected to resume in short order. Moreover, the falling stock prices are coupled with the decrease in trading volumes, and hence it would not be just selling, but more about lack of buying interest. This can imply that the market is not as weak as it appears to be.
Private financial institutions have the best risk-reward ratio available and are on the investment check-list. A proprietary sentiment indicator from Morgan Stanley recently entered a "buy" zone for the first time since mid-2022.
Even though this indicator could dip again, given its performance in the market crash of March 2020, the firm believes the current market fundamentals do not support such a major drop in sentiment.
On the macro front, accelerating government spending would help spur economic growth, according to the report. Moreover, the planned fiscal consolidation in 2026 is going to be much smaller compared with 2025, easing the pressure on the economy. Liquidity and regulatory burdens that RBI is set to ease will support growth further. Altogether, these facts and figures would seem to point out that the worst of this slowdown is over.
The report does add that during these uncertain times, retail investors have been very resilient, and that could work well for a recovery in the market. Still, it does note some dangers ahead, which are policy missteps, possibly an even greater correction in the US markets, and a possible slowing of world growth, that can counter the expectation of a quick turnaround.
All in all, the report is pretty bullish for the Indian stock market as conditions are beginning to set up for a rebound. The investors are advised to stay watchful, however, and be attentive to developments in both the global and domestic environments that might influence the market.