Morgan Stanley has set the target to life up BSE Sensex to 50,000 by December 2021 from the 37,300 for June 2021, by saying that the upcoming growth cycle is not fully priced in, and there is more upside to the index.
In a client note, Morgan Stanley said that we will remain in a bull market that started in March, and even though one should expect corrections along the way, the equity market may have more legs before it tops out.
“Return correlations across stocks with the equity market have risen to levels from where they tend to mean-revert. We expect domestic cyclical to outperform exports, with rate-sensitives and consumers outperforming whereas energy should underperform,” said Morgan Stanley.
The target for Sensex implies that the index will trade at a forward price-to-earnings multiple of 16 times.
On 15 November, an equity strategist, Ridham Desai, and Sheela Rathi said, “COVID-19 infections appear to have peaked, high-frequency growth indicators are coming in strong, government policy action is beating expectations, and Indian companies are picking up activity through the pandemic. Thus, we expect growth to surprise on the upside, rates trough to be behind, and real rates to remain in negative territory for several months.”
Foreign institutional investors have pumped in $4.15 billion in November so far, the highest in the last three months, while the inflow was at $10.7 billion so far this year.
In the overall scenario, Morgan Stanley is expecting small and mid-cap stocks to beat the narrow indices or large caps in 2021 as it feels that the concentration of market cap and profits may have peaked with the return of the growth cycle.
