India is set to see an uptick in investment, according to Morgan Stanley, which has named several stocks that the economic powerhouse thinks could benefit from increased capital expenditure. Morgan Stanley analysts said in a note titled “How to Play India’s Coming Capex Boom” that it was expecting supply-side factors and boosting investment in GDP, to align with improving demand. was. “The jump in capex makes Indian stocks look cheap,” wrote analysts at Morgan Stanley, led by Girish Achhipalia. “The most important component of profits is the rate of investment. Higher profits, in turn, induce investment creating a virtuous cycle of higher wages, higher consumption, more investment and greater profits.” The bank sees India’s investment rate to be 36% of its GDP over the next five years, up from the current rate of around 31%. This means that capex could grow at an annual compound growth rate of 16.7% through 2027, the bank said. According to the International Monetary Fund, India is the fifth largest economy in the world and is projected to post a GDP of $3.53 trillion in 2022. Stock Picks Morgan Stanley sees industry and financials as the main beneficiaries of the capex boom. “Capital goods, engineering and construction as well as big banks are a direct play on India’s rising capital expenditure,” said Achillia. One of the bank’s top picks is Larsen & Toubro, India’s largest construction firm. While the bank believes that L&T is “in a sweet spot” to benefit from increased investments, the stock’s price has a “strong correlation” with public capex. Achillia said the stock is also attractively priced. Morgan Stanley stock with a price target of 2,178 Indian rupees ($27.50) closed at around 1,962 Indian rupees on Monday, representing a potential increase of 11%. Read more Forget oil – coal is hot right now. Here are 2 stocks to play with, according to the pros, Sterling is tanking against the dollar. Here’s How Much It Could Go Down According to the Pros Want to invest in real estate? These REITs also outperform the likes of ICICI Bank and State Bank of India (SBI) in Morgan Stanley, a favorite of analysts. Achhipalia said, “Banks with liquidity or liability franchises are best positioned to deliver profitable revenue growth… Larger banks are best positioned to capitalize, we believe. ICICI and SBI are best positioned to drive capex cycles. Our favorite choice.” Achillia believes ICICI to be one of the private banks to deliver strong earnings in the current cycle and has set a price target of INR 1,225 on the stock. ICICI shares closed at around Rs 907 on Monday, which means a potential gain of 35.1%. He “materially” increased his credit growth for India’s largest public sector bank – SBI. The stock is also trading below its long term average, making it attractive from a valuation perspective. Morgan Stanley has a price target of INR 675 on SBI, which closed around INR 555 on Monday – a rise of 21.6%.