Mumbai: Global financial services firm Morgan Stanley has revised upwards its one year BSE Sensex target to 30,000 from its earlier projection of 26,000 stating that India Inc’s earnings cycle is turning and the growth is likely to accelerate in the coming months from around zero per cent to double digits.
“Our June-2017 BSE Sensex base case of 30,000 (up from 26,000 previously) implies an upside of 8 per cent in rupee terms and 2 per cent in dollar terms respectively.
“The likely single-digit returns are consistent with the position of India as one of our top picks in emerging market (EM) equities and our cautious view on global equities, where we are expecting downside in the coming months,” Morgan Stanley said in its latest India equity strategy report.
It expects Sensex earnings to grow at a compounded annual growth rate (CAGR) of 16 per cent over the next two years and the broader market to grow at a CAGR of 14 per cent during the same period.
While global liquidity is supportive, Morgan Stanley noted that the rising domestic savings flowing into equities is also playing an important role in boosting the domestic equity markets.
“We have been arguing about a domestic liquidity supercycle for stocks since 2014 – our thesis is intact. We like discretionary consumption (broad-based recovery gaining traction), retail banks (for leverage on a coming boom in retail loans), and select industrials (led by government capex even as private capex remains anaemic),” it said.
However, Morgan Stanley is underweight on the telecom sector amidst rising competition. It is also underweight on consumer Staples and healthcare due to expensive valuations.
