Morgan Stanley has set a target of 35,700 for the Sensex by December 2018, which is 6% above the index’s closing of 33,602.76 yesterday. The brokerage said a combination of supportive global growth, improving capex, fiscal spending and a buoyant consumer augur well for growth in 2018. It is optimistic on industrials, corporate banks, infrastructure owners, discretionary consumption, domestic materials and software stocks.
Morgan Stanley said earnings prospects are the strongest since 2010.
Morgan Stanley said India will outperform emerging market in 2018 as the level of trailing FPI inflows suggest a bounce in FPI demand for Indian stocks. It also said the best-case-scenario analysis shows Sensex could touch 41,500 by December 2018. The Sensex has risen 26% so far this year.
The brokerage forecasts a runway for growth with consumption and exports picking up, paving the way for a private capex recovery in 2018.
Last week, investment bank Goldman Sachs had set a target of 11,600 for the Nifty by next December. It said the Indian economy is likely to grow at 8% in 2018-19 as the massive bank recapitalisation will help revive the long-stalled credit demand and private investments.
Morgan Stanley does not see significant easing of monetary policy, although there is further risk of higher fiscal spending as the country approaches elections in 2019.
The brokerage is overweight on industrials given their positive view on private capex. They also like corporate banks, infrastructure, discretionary consumption, domestic materials and software stocks.