Mumbai, July 9 -- Global brokerage Morgan Stanley has turned constructive on Indian equities, arguing that the recent underperformance and valuation de-rating of domestic markets are cyclical and set to reverse as economic growth accelerates.

"We argue India's relative de-rating is cyclical and with growth acceleration in the pipeline, it has potential to reverse," the brokerage said in its latest India Equity Strategy Playbook released on July 6. It added that with "depressed trailing performance and foreign ownership, this could be very positive for equities going forward."

Morgan Stanley expects India to remain a defensive growth market, supported by macro stability, improving investment activity and robust domestic liquidity. The br...