Morgan Stanley Shifts India Equity Focus, Adds Reliance and Varun Beverages to Key List
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Morgan Stanley’s latest adjustments to its India Equity Strategy focus list signal a preference for established, large-cap companies poised for growth in key sectors.
Global brokerage firm Morgan Stanley has significantly reshaped its India Equity Strategy focus list for the Asia Pacific region, adding Reliance Industries Ltd (RIL) and Varun Beverages Ltd (VBL) while removing Interglobe Aviation (IndiGo) and Jubilant Foodworks. The move, announced Thursday, reflects the firm’s increased appetite for large private sector companies within the Financials, Consumer, and Industrial segments.
“Overall, we recommend large private sector Financials, Consumer and Industrial stocks,” the firm stated in its latest update. This strategic shift underscores a broader trend toward prioritizing stability and proven performance in a dynamic global market.
Reliance Industries: A Bet on AI and Green Energy
Reliance Industries’ inclusion on the focus list is largely driven by its ambitious expansion into artificial intelligence (AI) and clean energy. Morgan Stanley projects a substantial value unlock for the conglomerate, estimating RIL “is poised to unlock $50 billion in value through its strategic push into New Energy and AI.”
A central component of this strategy is the development of a multi-gigawatt Gen AI datacentre utilizing NVIDIA Blackwell chips, a project undertaken in partnership with Google and Meta, and backed by a planned $15 billion investment by 2027. Despite the significant scale of this undertaking, one analyst noted that the brokerage believes the market currently undervalues RIL’s AI potential.
Beyond AI, Morgan Stanley highlighted RIL’s position in the renewable energy sector. With China reducing its polysilicon capacity by a third, RIL is projected to become South Asia’s sole fully integrated 20GW solar chain by 2027, capitalizing on the global shift towards clean technology. The firm also pointed to the continued strong performance of RIL’s Oil-to-Chemicals (O2C) business, retail operations, and telecom services, fueled by growth in fast-moving consumer goods (FMCG) and fixed wireless users.
Energy analyst Mayank Maheshwari has revised his valuation of RIL’s New Energy + AI vertical upwards to $25 billion, an increase from a previous estimate of $19 billion. Morgan Stanley anticipates an 11% Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) through fiscal year 2028, with potential for multiple expansion across various business segments.
Varun Beverages: Scaling Success and Shifting Sentiment
The addition of Varun Beverages Ltd (VBL) to the focus list is attributed to the company’s demonstrated ability to successfully scale operations both domestically and internationally, coupled with a more positive market outlook.
“VBL has a solid track record of scaling domestic and international opportunities,” the report states. Consumer analyst Sheela Rathi observed that “the worst of growth weakness (led by seasonality) has passed.” Recent company messaging indicating a pause in new market expansions and a focus on the alcobev segment are viewed as positive developments, “strengthening the case for stock re-rating.”
Interglobe Aviation and Jubilant Foodworks Exit the List
To make room for RIL and VBL, Morgan Stanley removed Interglobe Aviation (IndiGo) and Jubilant Foodworks from its focus list. The brokerage did not provide specific reasoning for these removals.
These adjustments reflect Morgan Stanley’s evolving assessment of the Indian equity market and its commitment to identifying companies best positioned to deliver long-term value. The firm’s emphasis on large-cap, private sector players suggests a cautious yet optimistic outlook on India’s economic trajectory.
