Equity Research major Morgan Stanley (MS) on Monday said the Sensex could hit 80,000 by the end of 2023. This comes even as the Sensex closed at a record high of 62,504 after gaining 0.34 per cent, or 211 points. The Nifty rose 0.27 per cent, or 50 points, to close at 18,562. Nifty is just 53 points away from making a new lifetime high. Nifty50 hit a record high of 18,611.05 on Monday, surpassing its previous peak touched 13 months ago. 

According to MS, the Sensex can gain 30 per cent from its current levels if global commodity prices remain low, India is included in the global bond index, and the corporate earnings growth of Sensex companies compounds by 25 per cent next year.

India’s inclusion in the global bond index alone can bring $20 billion in inflows, MS said in an outlook report on Monday. The Sensex closed at a record high of 62,504 after gaining 0.34 per cent, or 211 points. The Nifty rose 0.27 per cent, or 50 points, to close at 18,562. Nifty is just 53 points away from making a new lifetime high.

“The market still does not appear at extremes when measured on flows, holding periods, market breadth, and deviation from the 200 DMA (day moving average),” the report by MS noted. It further said that government policy and a structural rise in equity savings boosted corporate profit shares in GDP, which mainly helped India run a monetary policy that is less sensitive to the US Federal Reserve. 

MS says that India was gaining share in global exports and the slowdown in global growth was affecting the country less than in the past.

“India’s relative valuations are just off all-time highs and appear to be an impediment to further outperformance. That said, India is likely to have better growth than most parts of EM (emerging markets), a sustained domestic bid, a relatively strong macro environment, and light positioning by foreign portfolio investors (FPIs). Based on our indicator, the market is pricing in much less earnings growth than it was at the start of 2022,” MS said while giving its best case projections.

The MS base case scenario for Sensex is 68,500, and the worst case is 52,500, which is if oil prices spike sharply, the RBI hikes rates aggressively, Sensex earnings compound at only 18 per cent, and the world goes into recession.

Party spoiler

“If the global economy slips into recession, it would not be good news for India, which exports about 20% of its output. Commodity complexes, especially oil and fertilizer, may have a greater impact on India’s macroeconomic conditions, given the adverse impact on inflation and, hence, rates and growth. In our base case, global liquidity is likely to improve in 2023, led by a peak in the dollar, though in a bear case scenario this may turn out otherwise. India’s equity return correlations with the world are elevated, and a further fall in global share prices may be a headwind for Indian stocks,” MS said. 

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