Stepping into the second half of 2021, worldwide study and brokerage firm Morgan Stanley says its top indicators recommend an upside threat in index returns going forward. This has led analysts at Morgan Stanley to retain their bull-case Sensex target of 61,000. “The market’s ongoing consolidation is improving its return prospects going into the second half of 2021 albeit the immediate triggers pertain to the pace of the likely deceleration of the second COVID-19 wave and improvement in vaccine supply,” a current note by Morgan Stanley stated. The brokerage firm had revised its Sensex target for 2021 just after the Union Budget in February.
“Our set of 16 leading indicators and six coincident or lagging indicators suggest an improving market outlook for the second half of 2021,” the report stated. The challenge for stock markets, in their view, comes from the waning liquidity and valuation assistance.
Bull, Base, and Bear case situation
Largecap index returns are anticipated to accelerate in the coming months for India, outperforming other emerging markets. The bull-case requires Sensex greater to 61,000. For this target to materialise, Morgan Stanley estimates that the virus ebbs entirely, recovery in development is sustained, and worldwide stimulus supports asset costs. Further, the report added that for Sensex to attain 61,000 the government will will need to provide robust policy like infrastructure creation, ease of carrying out small business and fiscal consolidation.
Morgan Stanley’s base case situation sees the index at 55,000 by December this year. “This assumes stability in the current virus situation and a recovery in the economy per our forecasts. We expect Sensex earnings to rise 32% in F2022,” the report stated. For Sensex to attain these levels, no fresh fiscal stimulus is anticipated to be launched but continued assistance from the government on administrative and legislative reforms is anticipated.
The bear case target for Sensex is at 41,000. The predicament appears attainable if the virus lingers effectively into the second half of this year and development falters which is additional dealt with no policy response, top to losses in the monetary program. However, Morgan Stanley analysts only see a 20% possibility of this situation taking location.
Portfolio technique
In terms of equity portfolio technique, Morgan Stanley domestic cyclicals, followed by price-sensitive stocks, worldwide cyclicals, defensives exporters and mid-caps, significant-caps, and compact-caps in the identical order. “This is a stock-picker’s market, with ample alpha opportunity underscored by falling correlation of returns across stocks,” the note stated.
(The suggestions in this story are by the respective study and brokerage firms. TheSpuzz Online does not bear any duty for their investment tips. Please seek the advice of your investment advisor prior to investing.)