Don't compare this bull run with FY04 boom: Morgan Stanley

Moneycontrol Bureau

Brokerage house Morgan Stanley says the widely held view that India is at the beginning of a new multi-year bull market like the one seen in 2003-04, may not be correct.

According to the brokerage, while there are some similarities, there are plenty of dissimilarities as well. In a nutshell, the macro and market environment were much more appealing at the start of bull market in 2003-04

“The similarities we found were the state and direction of global liquidity, the 2-year forward expectation of earnings growth, which was 15% for both periods, the ending point of absolute valuation multiples and sector performance ranks," says the Morgan Stanley note.

"The level of consumer inflation, real effective exchange rate, current account, policy rates, interest rates, trailing earnings growth, corporate debt, relative valuations to EM and local bonds and broad market valuations were lower a decade ago compared to today whereas GDP growth, IIP growth, real rates, domestic liquidity, and ROE were higher a decade ago than today," says the Morgan Stanley note.

The biggest qualitative difference, according to Morgan Stanley is that in 2004 the market had run up ahead of elections but post-reforms whereas this time around it has run up into elections but arguably pre-reforms.

On the positive side, the brokerage feels that macro-indicators are turning for the better, as was the case in 2004.

"Growth is improving, inflation is falling, the CAD is compressing and real rates are rising," said the Morgan note, adding that every bull market had its own set of drivers and comparisons with previous bull markets were unwarranted.