Demonetization: Morgan Stanley has some good news for Indian economy

Demonetization: Morgan Stanley has some good news for Indian economy

The impact of conclusion can solely be short-run and India's growth momentum is probably going to induce back on recovery path from Apr next year with support from consumption and exports, says a Morgan Stanley report.

According to the worldwide monetary services firm, the currency replacement programme may be a roadblock within the short term and value growth for the quarters ending Dec and March is predicted to cut down by around 50-75 bits per second. The broad growth outlook of the country but, remains unchanged, it said. "We maintain our overall constructive outlook on Asian nation. we tend to expect growth to be back on the recovery track from 2Q17 once a briefamount of lag between November 2016 and March 2017, owing to the currency replacement program," Morgan Stanley aforesaid during a analysis note.

The report expects consumption, that accounts for sixty per cent of value, to live through the quarter ending June '17, and therefore the recovery to broaden following the pick-up publicly capex and FDI flows. Moreover, as world growth is predicted to accelerate to three.4 per cent in 2017 from three per cent in 2016, following that India's exports is probably going to support AN overall recovery in 2017 once being a retardant in 2016, the report noted.

On equity markets, the report aforesaid that the country can exit the low come back atmosphere of the past 2 years, due to higher equity valuations. "In our read, equities ar seemingly to deliver fourteen per cent INR returns in 2017, compared with (-) three per cent in 2015 and 2016," Morgan Stanley aforesaid.

Equity valuations relative to bonds ar the most effective since 2013. Asian nation is one in all our prime rising market picks, it added. On RBI's policy stance, the report aforesaid that rising North American nation rates mean that the run batted in must maintain AN adequate buffer on real rates and not cut rates sharply in response to short-run weakness in growth arising from conclusion. tho' within the base case, Morgan Stanley had expected another rate cut of twenty fivebits per second within the current easing cycle, however indications within the Dec policy statement counsel that the financial institution isn't too involved concerning the expansion impact from the currency replacement program.

"Moreover, the increase in oil costs, North American nation rates and viscousness in core inflation means we tend toseem to be nearing the top of the easing cycle," the report aforesaid.

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