The global investment bank prefers largecaps over midcaps. On the sectoral front, it likes banks (private corporate and retail), discretionary consumption, industrials and domestic materials, and advise investors to avoid healthcare, staples, utilities, global materials and energy.
Indian stocks are jostling weak emerging markets, rising rates, higher oil prices, an upcoming general elections and relatively rich mid-cap valuations. Morgan Stanley, in its latest report titled ‘India Equity Strategy’, highlights 6 factors which are favouring Indian markets and six which are working against.
The global investment bank prefers largecaps over midcaps. On the sectoral front, it likes banks (private corporate and retail), discretionary consumption, industrials and domestic materials, and advise investors to avoid healthcare, staples, utilities, global materials and energy.
The global investment bank in its base case scenario (with 50% probability) expects the S&P BSE Sensex to trade at 36,000 by June 2019 which is under 16x one-year forward P/E, and below historical averages.
Under the scenario, the earnings growth will be 5% (year-on-year) in FY18, 23% year-on-year in FY19 and 24% year-on-year in FY20.
In the bull case scenario, which has a probability of 30%, Morgan Stanley sees Sensex hitting 44,000-level largely led by better-than-expected outcomes, most notably on policy and global factors. The market starts believing in a strong election result as well, and the earnings growth accelerates to 29% in FY19 and 26% in FY20.
In the bear case scenario, which has a 20% probability, the S&P BSE Sensex could slip towards 26,500 as global conditions deteriorate and the market starts pricing in a poor election outcome. Sensex earnings will grow at 21% in FY19 and 22% in FY20.
Here are 6 factors which are in favor of Indian equities:
What is working against Indian equities?
Morgan Stanley Focus List:
Stocks which are included in Morgan Stanley’s focus list include names like Bajaj Auto, M&M, Maruti Suzuki, ZEE Entertainment, Titan Company, HDFC Bank, IndusInd Bank, Adani Ports, etc. among others.
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Source: Moneycontrol.com
First Published: Jul 16, 2018 5:19 PM IST
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