April 22 (Bloomberg) -- Investors should cut their holdings of riskier Indian stocks after a rally helped the nation's benchmark index outperform both emerging and global markets in the past month and as volatility rises, Morgan Stanley said.
The Bombay Stock Exchange Sensitive Index has risen to its 200-day moving average, indicating that investors should consider selling shares, Morgan Stanley analysts Ridham Desai and Sheela Rathi said in a report. The Indian stocks rally is the sixth since the bear market began in January 2008, as well as the strongest, the analysts said.
The Sensex has jumped 22 percent in the past month, the seventh-best performer among the 89 indexes tracked by Bloomberg globally in the month till yesterday. The MSCI Emerging Markets Index rose 13 percent during the period, while the MSCI World Index, which tracks developed nations, climbed 8.4 percent.
"India has outperformed emerging markets and the world in this rally, underpinning its high beta status," the analysts said. The Sensex's advance to the moving average "is usually a good signal to sell in a bear market."
The seven-day moving average for the ratio comparing advances and declines in the Indian market has also climbed to the highest since at least January 2008, making the current advance the broadest during the period, the analysts said. Indexes tracking small and medium-sized companies have also posted better gains than the Sensex, according to the report.
Investors should reduce so-called portfolio beta as the ongoing elections and earnings season increases volatility in the market, the analysts said. Indians began electing on April 16 a new government that will have to revive an economy growing at its slowest pace in six years. Polls end on May 13.
To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net .
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