Morgan Stanley sees Sensex at 42,000 by Sept 2019, adds SBI, Prestige, Apollo Hospitals on Focus list

September 14
15:02 2018

Global investment firm Morgan Stanley has raised its 30-share BSE Sensex target to 42,000 for September 2019, implying a potential upside of 11 percent, reports CNBC-TV18.

Its earlier base case target was 36,000 for June 2019, which is already achieved by the Sensex in July 2018.

The index has rallied nearly 11 percent year-to-date on top of around 28 percent increase in 2017 driven majorly by June quarter earnings along with sustained domestic money inflow.

June quarter earnings recovery was so good that not only Morgan Stanley, but other brokerage houses also turned bullish on India on the back of improving fundamentals of the country, though rising crude oil prices and weak rupee are risks for short term.

Morgan Stanley in its June 2018 report had stated the bull case Sensex target at 44,000.

“In a bull case scenario, it sees a 30 percent probability of the Sensex rallying towards 44,000. Better-than-expected outcomes, most notably on the policy and global front will result in such an up move. The market starts believing in a strong election result and earnings growth accelerates to 29 percent and 26 percent in FY19 and FY20, respectively,” the report had reasoned.

In its latest report, Ridham Desai of Morgan Stanley said a delay in earnings growth recovery was one of the key reasons why investors were not feeling bullish on Indian equities. “We think this is likely to change as growth picks up in the coming quarter.”

On the latest data front, Q1FY19 GDP grew at 8.2 percent on strong core performance and a favourable base, against 7.7 percent in previous quarter. Even CPI inflation in August cooled off to 3.69 percent from 4.17 percent in July though trade deficit widened in July.

He said Indian equities continued to be in an uptrend and investors should bet on favourite underperformers. “Investors should choose price underperformers with improving earnings outlook and finally broaden their portfolios by adding small and midcaps.

On its Focus List, Morgan Stanley added SBI, Prestige Estates and Apollo Hospitals, and removed Infosys, Havells and Zee Entertainment, given the recent downgrades.

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