Morgan Stanley downgrades global equities

Morgan Stanley in a recent report downgraded global equities from equal-weight to underweight as the upside remains fairly limited from current levels.

Over the next 12 months, it is believed that there is just 1 percent average upside to Morgan Stanley's price targets for the S&P 500, MSCI Europe, MSCI EM, and Topix Japan.

"We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth, the latter usually matters more for returns. Easing has worked best when accompanied by improving data," the global investment bank said in a note.

Budget proposals

Some of the Union Budget proposals do not favour market momentum. For example, a Budget proposal to increase minimum public shareholding of listed companies to 35 per cent from 25 per cent, will mean a lot of money will be sucked out, in order to adhere to or comply to this requirement.

If the proposals are to be implemented in the next 18 months or so, we might see a large amount of off loading, which might take place. This was one of the reasons that spooked the markets in trade and the indices dived.

Strong jobs data

Job growth in the United States rebounded strongly in June 2019, with government payrolls surging, the Labour Department's closely watched employment report showed on Friday, suggesting May's sharp slowdown in hiring was probably a one-off, Reuters reported.

The jobs data, which came in at 224,000, has dashed hopes of aggressive rate cuts by the US Fed as was anticipated earlier. A cut in interest rates is good for the stock markets, as money moves from debt to equities. 

The number of jobs added was also the higher in 5 months.

Sell-off across the Asian markets

Asian markets, like the Shanghai Composite also saw a sell-off. What was interesting about today's market was that some heavyweight stocks like HDFC Bank and HDFC contributed to the fall. The largest fall came in the shares of Hero Motor Corp, which plunged as much as 4 per cent, led by L&T. From the Nifty, the Bajaj twins saw massive falls. Both these companies, did not have too much by way of proposals in the Union Budget.

Markets are expected to remain increasingly volatile going ahead. At lower levels, there maybe some buying opportunity for investors.

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