India is poised to see a surge in investment, according to Morgan Stanley, which named a few stocks it thinks could benefit from increased capital spending in its economic powerhouse. In a note titled “How to Play for India’s Upcoming Investment Capital Boom,” Morgan Stanley analysts said that supply-side factors are expected, increasing investment in gross domestic product by adjusting to rising demand. “A possible capital increase is making Indian stocks look cheap,” said Morgan Stanley analysts led by Girish Achhipalia. “The most important component of profit is the investment rate. In turn, higher profits drive investments that create a virtuous cycle of higher wages, more consumption, more investment and more profits.” The bank sees India’s investment rate reach 36% of its GDP in the next five years, with the current rate being around 31%. The bank added that this means that investment spending can grow at a compound annual growth rate of 16.7% through 2027. India is the world’s fifth largest economy and is expected to post a GDP of $3.53 trillion in 2022, according to the International Monetary Fund. Stock choices Morgan Stanley sees the industrial and financial sectors as the main beneficiaries of the capital boom. “Capital goods, engineering and construction as well as big banks are a direct play on India’s rising capital expenditure,” Achhipalia said. One of the bank’s most preferred companies is India’s largest construction firm, Larsen & Toubro. The bank believes L&T is in a “sweet spot” to capitalize on growth in investments and that its stock price has a “strong correlation” with public investment spending. Achhipalia added that the stock also appreciated attractively. Morgan Stanley has a price target of INR 2,178 ($27.50) for the stock, which closed at around INR 1,962 on Monday, representing a potential increase of 11%. Forget oil – coal is hot right now. Here are 2 stocks to play for pros where Sterling is depreciating against the dollar. Here’s how much it can drop according to professionals Do you want to invest in real estate? These REITs are among analyst favorites Morgan Stanley also likes ICICI Bank and State Bank of India (SBI). “Banks with liquidity or debt concession are best positioned to deliver profitable revenue growth … We believe large banks are in the best position to capitalize. ICICI and SBI continue to be our preferred choices to play through the capital expenditure cycle,” Achhipalia said. said. Achhipalia believes ICICI is in the best position among private banks to deliver strong earnings in the current cycle and has set a price target of 1,225 Indian rupees for the stock. ICICI shares closed at around Rs 907 on Monday, which represents a potential rise of 35.1%. It also “materially” boosted loan growth for SBI, India’s largest public sector bank. The stock is also trading below its long-term average, which makes it look attractive from a valuation standpoint. Morgan Stanley has a price target of INR 675 on SBI, which closed at around INR 555 on Monday – an implied increase of 21.6%.
Indian stocks to be bought to play investment boom: Morgan Stanley
