Sensex: Is 50,000 coming soon?

Morgan Stanley raised its target for the BSE Sensex to 50,000 by December 2021 from the earlier 37,300 for June 2021.

Mumbai: Continuing the positive momentum, Indian stock markets scaled new peaks on Tuesday after closing in green in 11 of the last 12 trading sessions. The benchmark equity index Sensex hit the 44,000 mark in the intra-day session before closing the day at 43,953.

Interestingly, besides COVID-19 vaccine hopes and clarity on the US election outcome, much of this market rally is being fuelled by the positive outlook being given by global brokerage firms in the last few days. On Tuesday, Bank of America’s (BofA’s) monthly investor survey showed that investors worldwide are in “full bull” mode, deploying more money into emerging markets on hopes that a COVID-19 vaccine will turn around the hard-hit market segments.

Reuters reported that of the 190 fund managers with $526 billion in assets under management surveyed by BofA, half expect emerging markets to outperform in 2021. For 2021, investors named “long” emerging market assets, S&P 500 and oil as their favourite trades, the survey added.

Meanwhile, global investment firm Morgan Stanley raised its target for the BSE Sensex to 50,000 by December 2021 from the earlier 37,300 for June 2021.In a note dated 15 November, Morgan Stanley’s equity strategists said that there is more upside to the index as the upcoming growth cycle is not fully priced in.

Read: Sensex, Nifty hit record highs; Sensex breaches 44,000

“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,” said Ridham Desai and Sheela Rathi, equity strategists at Morgan Stanley.

In fact, Morgan Stanley has set a target of as high as 59,000 for the Sensex by December 2021 in a bull-case scenario, a situation where the Covid crisis settles down, recovery in growth is sustained and global stimulus supports asset prices. On the contrary, the Sensex may hit 37,000 levels in a bear-case scenario, a situation in which the pandemic lingers well into 2021, growth falters and the policy response is not adequate.

Last week, Goldman Sachs had also upgraded Indian markets to ‘overweight’ from ‘marketweight’, saying that India is the ‘most positively sensitive’ market to vaccine optimism. The firm had set a December 2021 target for the Nifty 50 index at 14,100. Goldman Sachs had also said it expected India’s real GDP (gross domestic product) growth to bounce back to 10% in 2021 and 7.2% in 2022 as against a contraction of 9% in 2020.