Sensex at 68,500 by December? What's behind Morgan Stanley's bullish target
In its mid-year global review, Morgan said its economics team suggested that prospects for sustained strength in consumption and business investment in India and Indonesia have rarely looked better.
- Jun 6, 2023,
- Updated Jun 6, 2023 6:04 PM IST
Morgan Stanley has set a Sensex target of 68,500 by the December 2023, assuming no major surge in commodity prices, no recession in the US economy and supportive government policy back home. The target suggests 5,707 points, or 9 per cent upside potential over Sensex's closing value of 62,792.88 on Tuesday.
At present, Sensex is trading at 20.5 times its trailing 12-month EPS, which is at slight premium to a 25-year average of 20 times. This premium, the global investment bank said, reflects greater confidence in India's medium term growth.
The foreign brokerage said India continues to look attractive despite high valuations, due to strong earnings growth prospects and domestic and foreign flows.
In a report dated June 5, Morgan Stanley said Sensex and Nifty reported in line revenue growth of 14 per cent and 12 per cent YoY. Net profit growth for Sensex and Nifty stood at 21 per cent and 18 per cent, beating its analysts' expectations by 10 percentage points and 4 percentage points, respectively.
It noted that share of top companies in net profit remained at cycle-low levels for an eighth consecutive quarter.
"Morgan Stanley analysts and consensus both forecast F2024 Sensex earnings growth of 18 per cent, which is 10 per cent below our top-down estimate of 29 per cent. The 3MMA consensus earnings estimate revision breadth improved for FY1 and FY2to -0.8 per cent and -0.2 per cent versus -2.1 per cent and -2.4 per cent, respectively, as of the end of Mar-23. Consumer Discretionary and Technology have been subject to the most positive and negative revisions in earnings growth estimates, respectively," it said.
Earlier, in its mid-year global outlook, Morgan Stanley said it has cut its December 2023 EPS for the EM index materially from $89 to $80 (consensus $78), with a key input change being its team’s forecast for a stronger dollar.
That said: " For India and Indonesia, we concur with our economics team that the prospects for sustained strength in consumption and business investment have rarely looked better," it noted.
Morgan Stanley has set a Sensex target of 68,500 by the December 2023, assuming no major surge in commodity prices, no recession in the US economy and supportive government policy back home. The target suggests 5,707 points, or 9 per cent upside potential over Sensex's closing value of 62,792.88 on Tuesday.
At present, Sensex is trading at 20.5 times its trailing 12-month EPS, which is at slight premium to a 25-year average of 20 times. This premium, the global investment bank said, reflects greater confidence in India's medium term growth.
The foreign brokerage said India continues to look attractive despite high valuations, due to strong earnings growth prospects and domestic and foreign flows.
In a report dated June 5, Morgan Stanley said Sensex and Nifty reported in line revenue growth of 14 per cent and 12 per cent YoY. Net profit growth for Sensex and Nifty stood at 21 per cent and 18 per cent, beating its analysts' expectations by 10 percentage points and 4 percentage points, respectively.
It noted that share of top companies in net profit remained at cycle-low levels for an eighth consecutive quarter.
"Morgan Stanley analysts and consensus both forecast F2024 Sensex earnings growth of 18 per cent, which is 10 per cent below our top-down estimate of 29 per cent. The 3MMA consensus earnings estimate revision breadth improved for FY1 and FY2to -0.8 per cent and -0.2 per cent versus -2.1 per cent and -2.4 per cent, respectively, as of the end of Mar-23. Consumer Discretionary and Technology have been subject to the most positive and negative revisions in earnings growth estimates, respectively," it said.
Earlier, in its mid-year global outlook, Morgan Stanley said it has cut its December 2023 EPS for the EM index materially from $89 to $80 (consensus $78), with a key input change being its team’s forecast for a stronger dollar.
That said: " For India and Indonesia, we concur with our economics team that the prospects for sustained strength in consumption and business investment have rarely looked better," it noted.