Morgan Stanley Raises Sensex Target to 55,000 After India Budget
· Morgan Stanley has increased its year-end forecast for India’s Sensex to 55,000 from 50,000 following the budget, saying sentiment was buoyed by the push for growth and the lack of any new income tax.
· A refreshed approach to monetization of government assets including proposed privatization of two public sector banks and an insurance firm is also positive, analysts including Upasana Chachra, Ridham Desai and Sheela Rathi in Mumbai write in research note.
· The new target for Sensex is co.’s base case scenario and assumes stability in the current virus situation and a recovery in the economy based on its forecasts.
· The budget also contained measures to make the financial sector more robust including a new development financial institution, an asset reconstruction company and an institution to add liquidity into the corporate bond market.
· If the measures are executed properly, they have the potential to increase the share of corporate profits in GDP, and help bring about a new private investment cycle and a recovery in domestic equity flows and earnings growth.
· Investors should favor domestic cyclical sectors, rate-sensitive companies and mid-cap stocks.
· Morgan Stanley is also positive on the rupee, saying better growth and equity inflows will be supportive. However it is bearish on Indian bonds given the substantial planned debt issuance.