Reuters Market Eye - Morgan Stanley has upgraded Indian stocks to equalweight in its latest report after having rated them underweight since the first quarter of 2011.

The report, titled Asia/GEMs strategy, says India is now trading at a price to book multiple of 2.1x, close to the trough valuations of 2.0x in the 2002 and 2008 cycles.

The investment bank has a Sensex target of 19,954, representing an 18 percent upside from the current levels, the Economic Times reported quoting from the report.

This is an indicator of the extent to which the India market is already pricing in the adverse global environment and the current domestic situation of high inflation and slower trend GDP growth, says the report.

Indian stocks tend to perform well versus MSCI emerging market indexes after a period of oil price declines, the global investment bank has added.

However, the bank has noted that Indian markets are weighed down by the slowing GDP growth and rupee depreciation.

Last week, JPMorgan upgraded Indian equities from overweight to neutral despite acknowledging the risk factors facing the economy.

Deutsche Bank also had upgraded Indian stocks to overweight from neutral recently.