Sensex to clock 45k, Nifty to reach 13,500-levels in 1 year? This is what Morgan Stanley predicts

This week's trading kick started on a positive note, with investors turning net buyers. After soaring up to intraday high of 39,740.83 on Monday, the Sensex was trading at 39,696.51 up by 261.79 points or 0.66%. Gainers on Sensex were major stocks like Tata Steel, Yes Bank, NTPC, L&T, HDFC, M&M, HDFC Bank, Vedanta, SBI, Power Grid and Axis Bank. Meanwhile, the Nifty 50 surged by over 81.05 points or 0.68% trading at 11,925.15 at around 1223 hours. Similarly, even Indian rupee appreciated by opening  above 19 paise to 69.34 against the US dollar benchmark index at interbank forex market. 

Optimism on Indian equities has become more clear due to NDA government coming back in power. The markets remained highly bullish last week. Going forward, a new trend has been predicted by Morgan Stanley which is an indication to buy more Indian equities. 

Economists at Stanley in their research note said, "The market's focus will now shift to the growth cycle on which we are constructive. We expect the RBI to be more accommodative and the economy to come out of its soft patch of the past few months."

In regards to foreign investors, over past five years, the note said that the government has been focused on foreign direct investment (FDI) flows resulting in cumulative gross FDI inflows US $286bn. "In fact the trailing five year FDI has risen to 4.6 times the trailing FPI flows as compared to 1.3 times in 2014. We expect the new administration to continue to emphasize FDI flows. However, at the same time, we expect policy initiatives to attract portfolio flows in both debt and equity given a new found emphasis we are seeing in boosting overall USD flows. FPIs remain critical to India's story and are the largest stakeholders (after controlling stakeholders), owning about 20% of India's listed companies," the note said.

"Capital market reforms to enthuse portfolio investors including greater accessibility, higher foreign limits, enhanced market liquidity, and improved corporate governance standards, could be areas of focus in the coming months, we believe," the note added. 

The note further added that earnings could be heading into a new cycle and domestic flows should return with strength. "We set our Jun-20 target for BSE Sensex at 45,000 (Nifty ~ 13,500), an upside of 15% from here," it said.

Where should you place your bets?

Economists at Stanley says, "We are adding Asian Paints and Interglobe Aviation to the focus List at the expense of Adani Ports and Eicher Motors."

On sector wise performance, the note added, "The performance gap between narrow and broad markets has a fair bit of distance to cover to hit normal levels so we expect the broad market to outperform a likely rising narrow market (Nifty/Sensex). We like “growth at a reasonable price” stocks among Financials, Discretionary Consumption, and Industrials – both large and midcaps."