Sell India, says Morgan Stanley, JP MorganRajesh Abraham / Mumbai February 28, 2007On the eve of Budget 2007, top foreign brokerage houses Morgan Stanley and JP Morgan are advising investors to stay away from the Indian markets saying the risk factors involved in Indian equities are much higher for taking any exposure in the domestic markets.Morgan Stanley analysts Ridham Desai and Kuleen Tanna, in their India strategy report, point to five myths on the Indian market and conclude that "the ultimate point is what returns are embedded in stock prices rather than what multiples they are trading at. Using a rigorous threestage residual income model, we conclude that at the current level, the market is implying a long-term (10-year) compounded annual return of 11 per cent. To us, this seems lower than what investors deserve based on our judgment of risk factors involved in Indian equities."Similarly, JP Morgan strategist Adrian Mowat's highest conviction call at the moment is "to get out of India" while its head of regional banks, Sunil Garg, has a zero weighting in his regional banks portfolio for Indian banks, first time since the mid-90s, while Bharat Iyer, JP Morgan's Indian strategist is concerned that risk to consensus earnings estimates is on the downside. JP Morgan has downgraded India to `underweight' drawing a parallel between the rising interest rates at the moment to 1994-period when prime lending rates and mortgage rates hit the roof.The first myth relating to the Indian capital markets, according to Morgan Stanley, is Indian equity valuations are overstated because of India
