Ridham Desai of global brokerage Morgan Stanley has cut his year-end Sensex The earlier target of 70,000 to 62,000, however, sees the index rise to 75,000 in its bull case scenario.
Its bull case scenario is based on India’s inclusion in global bond indices, resulting in inflows of around $20 billion over the next 12 months, if COVID-19 does not arise again, oil will quickly regain its recent growth and lasts longer than Reserve Bank of India (RBI) F2022-24, and earnings growth is 25% annually.
Meanwhile, its base case scenario of 62,000 is based on the assumption that as ongoing Ukraine-Russia tensions subside in weeks, there will not be a major restriction of economic activity as a result of future COVID-19 waves and that Morgan Stanley forecasts Accordingly the development will improve. “Government policy remains supportive and RBI does a calibrated exit. Sensex earnings are up 22% per annum as compared to F2022-24.
“Our revised BSE Sensex target of 62,000 implies a 16% increase to December 2022. This level means BSE Sensex will trade at a P/E multiplier of 25 times, which is 20x ahead of the 25 year average. Premiums above the historical average reflect high confidence in the medium term growth cycle in India,” he said in the note.
Indian stocks have so far resisted the rise in oil prices. While the template is one of high volatility and modest equity returns, at the portfolio level Morgan Stanley recommends shifting to a barbell strategy with broad sector positions.
“Indian stocks have performed remarkably well despite rising oil prices, possibly due to a combination of changes in the macro funding mix to FDI, declining oil intensity in GDP, higher real relative policy rates and a strong domestic bid on stocks. because of. That said, the length of military action in Ukraine may determine its effect on earnings and multiples,” the note added.
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