Morgan Stanley has updated its ratings on several leading consumer stocks, signaling a shift in its preference towards certain staples. The brokerage has upgraded Godrej Consumer Products Ltd. to “overweight” from “equal-weight”, and Hindustan Unilever Ltd. to “equal-weight” from “underweight”. In contrast, Dabur India Ltd. has been downgraded to “underweight” from “equal-weight”. According to Morgan Stanley, the current global environment has created a framework for certain consumer staples to excel, providing an opportunity for defensive stocks to outperform.
The brokerage attributes the resilience of these consumer staples to their ability to insulate themselves from global uncertainties. In a note, Morgan Stanley emphasized that “we re-position our staples’ preferences that are insulated from any reset.” This highlights the brokerage’s confidence in the performance of these stocks, which are well-equipped to weather economic challenges.
Morgan Stanley’s revised ratings are also driven by the prospect of margin improvement in the consumer staples sector, despite an economic slowdown. The brokerage believes that opportunities should be selective and not broad-based, with a focus on specific areas that are likely to benefit from the current global landscape.
The revised ratings are seen as a strategic shift in Morgan Stanley’s preference for certain consumer staples, which are expected to provide a higher level of resilience and protection in the face of global uncertainties. The brokerage’s positive outlook on Godrej Consumer Products and Hindustan Unilever reflects its conviction that these companies are well-positioned to capitalize on the current market environment.