By Siddhant Mishra
The Sensex may hit the 80,000-mark by the end of the next calendar year if the country is included in global bond indices and prices of commodities, such as oil and fertilisers, drop sharply, Morgan Stanley analysts said on Monday. The inclusion could result in nearly $20 billion of inflows over the next 12 months, the brokerage said, while making a bull case for a 30% chance of the blue-chip index hitting the number.
In the ‘2023 India Equity Strategy Outlook’ report, Morgan Stanley strategists said better earnings thanks to higher capex and benign material prices, moderation in the rate hike cycle by central banks in early 2023 and ebbing macro risks support the case for an upside to Indian equities. The report foresees the RBI exiting the rate hike cycle at 6.5% or 60 bps above the current level, thanks to declining inflationary pressure.
However, the base case is for the Sensex to breach 68,500-mark by December 2023, a 10% upside from current levels. This is assuming the elevated commodity prices resulting from the Russia-Ukraine war do not spill over to 2023, domestic growth stays on a strong path and the US doesn’t slip into recession.
While emerging markets are likely to benefit from a more benign world vis-à-vis 2022, and given India’s trailing outperformance and rich relative valuations, Indian equities will likely see a retracement of relative gains, the report said.
Morgan Stanley is overweight on consumer discretionary, industrials, financials and technology.