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Morgan Stanely sees Sensex at 45,000 mark by June 2020, after Modi’s thumping election win

FE Online
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With the Indian headline index Sensex breaching 40,000 mark for the first time ever, Morgan Stanley, a global brokerage house, expects it to rally further and hit a new high of 45,000 level by June, 2020, if the current administration continues at the centre. The Nifty which crossed 12,000 is also expected to hit a new high of 13,500 in the same time frame implying an upside of 15 percent from current levels. While, the final votes are being counted today, the trends so far already suggest thumping success for Narendra Modi for the second consecutive term.

With BJP reclaiming power for the second time in a row, Morgan Stanley expects India s apex bank, the Reserve Bank of India or RBI to be more accommodative. It further expects economy to come out of the soft patch of the past few months, global brokerage house said Thursday while the final votes are being counted.

We are adding Asian Paints and Interglobe Aviation to the Focus List at the expense of Adani Ports and Eicher Motors. We are overweight domestic cyclicals, both consumer and industrials, as well as financials, and underweight defensive sectors including healthcare and technology. We are overweight India in our EM model portfolio, Morgan Stanley said in its report.

The brokerage firm expects the current inflation framework- low food prices and positive real rates, fiscal consolidation,infrastructure spending and FDI focus with strong external affairs policies to continue. It thinks that the new government might bring some changes such as increasing cash transfers to poor people, more emphasis on portfolio flows, focus on India’s external trade and social or constitutional reforms.

Investor concerns include a fresh wave of NPLs, further slowdown in consumption hurting earnings growth prospects, Fiscal slippage, tepid or even negative domestic flows and global headwinds. Share prices will get further boost as Morgan Stanley expects RBI policy in early June, which will redress several of investor concerns in the coming weeks like ongoing liquidity infusion, verdict on RBI reserves, high frequency growth data, and the Union Budget.

Risks are mostly global (oil, Fed, trade tension) but our call assumes resolution to the ongoing strain in the financial sector via liquidity infusion and continuing fiscal discipline, Morgan Stanley further added.

Today, after a strong rally, the Sensex, Nifty pared gains as investors booked profit. While, the Sensex ended lower at 38,811.39 level, 298.82 points down from the last close, Nifty settled down 55.40 points at 11682.50 level from the previous close.