India Strategy -Consensus vs. Us: A Less-bearish Consensus:: Morgan Stanley Research,

What's new
The sell-side consensus rating has improved to a five- month high point. MS analysts and consensus disagree on 50% of the MS covered stocks. More important, consensus has a buy or an equivalent rating for 68% of the MS covered stocks while MS analysts have a buy or an equivalent rating for only 42% of the MS covered stocks. MS analysts appear to be more bearish than consensus. The table below highlights the strongest contrarian plays.

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Interesting Snippets
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AXSB, HDFC Bank, INFO and TCS are the most actively covered stocks by the Street (68-70 analysts).
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MCX, ING and ABNL have the most “buy” ratings.
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NALCO and GPL have the most “sell” ratings.
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Consensus ratings are most positive for Financials while they are least positive for Telecoms.


The “Sell-Side” Consensus Ratings: A Less-bearish Consensus
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Key Debate: Since our February 2012 update of consensus vs. MS, sell-side analysts have downgraded F2013 GDP and earnings estimates by 65bp and 1.6ppt, respectively. Moreover, the market is down 6% during this period. What has this done to the sell-side conviction levels vs. what we saw in Feb-12?
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What’s New: In the latest run of consensus ratings vs. MS ratings, we observe that the sell-side conviction level on MS coverage stocks has improved to a five-month high - at 0.34. A score greater than 0.3 implies a “buy” or an equivalent rating while a score of less than -0.1 implies a “sell” or an equivalent rating. The conviction level is highest across small- and mega- caps and the lowest for the large caps.
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We assign one point to a buy rating, and -1 point to a sell rating and hold is given a 0 score. We find that the consensus has a “buy” or equivalent recommendation on 68% of our coverage universe (of 126 stocks), better than the 59% in Feb- 12. Similarly, MS analysts have “buy” ratings for 42% of the universe vs. 41% in Feb-12. This suggests MS analysts remain more bearish than consensus.
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MS Analysts vs. Consensus: MS analysts agree with consensus ratings on half of the stocks considered in the sample (63 out of the 126 stocks) – a slight improvement from the previous update. Out of the 63 stocks, both set of analysts rate 42 stocks as buys, nine as sells and rest as hold or any other equivalent rating.
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Out of the 63 stocks where they disagree, MS analysts have a buy rating only on 10 stocks, while consensus has a buy rating on 43 stocks, once again suggesting a more bullish consensus.
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Within the MS coverage universe, there are 48 stocks (or 38% of our coverage universe) in which 70% or more of the Street has a “buy” or equivalent rating. MS analysts differ with the street on 22 out of these 48 stocks. On the other hand, there are only three stocks in which 60% or more of the Street has a “sell” or equivalent rating. Notably, MS analysts also have a “sell” rating for two of these stocks. Please see pages 4 and 5 for the most bullish and bearish consensus calls along with the contrarian calls between MS and consensus.
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Consensus Sector Calls: The average consensus ratings have fallen since Feb-12 for three out of the 10 sectors with Consumer Discretionary and Staples seeing marginal falls. On the other hand, Materials saw the most gains in mean ratings. The consensus ratings are most positive for Financials and Industrials, while they remain least positive for Telecoms (see page 6).
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Conclusion: The sell-side consensus conviction seems to be improving. Indeed, consensus seems to be more constructive than MS analysts. The opportunity, in our view, lies at the stock level.