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New Delhi, February 2 :
Global investment bank Morgan Stanley has reiterated a positive outlook on Indian equities following the Union Budget. The firm has maintained an overweight stance on Financials, Consumer Discretionary, and Industrials, according to its latest report.
The report said the Budget clearly signals the government’s long-term growth priorities. It noted that the Budget speech opened with a focus on semiconductors, highlighting a shift toward technology-led growth and advanced manufacturing.
“We remain constructive on Indian equities. We overweight Financials, Consumer Discretionary, and Industrials,” the report stated.
Budget Supports Growth-Oriented Sectors
Morgan Stanley said these sectors stand to benefit from the government’s emphasis on capital expenditure and growth-supportive measures. The investment bank expects higher public spending to boost private investment and economic momentum.
The report also pointed to continued expansion in the services sector and a growing focus on artificial intelligence (AI) as additional growth drivers.
Earnings Growth Likely in FY2027
Morgan Stanley expects these factors, along with a slightly slower pace of fiscal consolidation, to support earnings growth in FY2027. The report added that rising equity demand through buybacks could further strengthen earnings.
Fiscal Discipline Remains Intact
The investment bank noted that the Budget balances growth with fiscal responsibility. It aims to reduce the debt-to-GDP ratio while maintaining a gradual consolidation path.
The government has set a fiscal deficit target of 4.3 per cent of GDP for FY27, which closely matches Morgan Stanley’s estimate of 4.2 per cent. The report expects the central government’s debt-to-GDP ratio to reach 55.6 per cent in FY27, reflecting continued fiscal discipline.
Positive Medium-Term Outlook for Equities
Morgan Stanley said the combination of growth-oriented policies, support for emerging sectors like semiconductors and AI, and manageable fiscal consolidation creates a favourable environment for equities.
The firm believes the Budget improves medium-term earnings visibility, especially for sectors linked to domestic demand, financial services, and industrial growth.
Overall, the report reaffirmed Morgan Stanley’s positive stance on Indian equities, with Financials, Consumer Discretionary, and Industrials expected to remain key beneficiaries of the government’s growth strategy.
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