Sell if market rallies: Morgan Stanley

Says there is lack of support for a sustainable rise

Global brokerage Morgan Stanley has suggested that investors should unload if the market shows an upside.

It noted that there is a lack of fundamental support for a sustainable rise, though some of the sentiment indicators suggest a rally is possible, according to an India Strategy note dated August 20th.

“No doubt, some of the sentiment indicators we track appear to be reaching oversold territory and at some point in the next few Nifty points and few days, the market is likely to rally. However, until the fundamental construct remains the way it is – we think this will be a rally to sell, not buy. We remain cautious on banks and overweight US$ hedges from a portfolio perspective,” said the report authored by Ridham Desai, Sheela Rathi and Utkarsh Khandelwal.

The difference between earnings yield and short-term rates, an indicator of how cheap the market is, has not reached a buy trigger yet.

“Policy makers can trigger rallies from time to time by either resorting to subsidy reduction (steep hike in diesel prices) and/or raising foreign capital. The markets could also respond to better growth trends in China or stabilization in EM – however, these are unlikely to create a new bull run,” added the trio.