2024 elections: Morgan Stanley expects Sensex, Nifty to rise 10% by May 2024. Here's why

Morgan Stanley said the domestic stock market has historically approached elections with optimism and that it sees a familiar pattern this time around, with the market pricing in a result that favours continuity in the government with a majority. The foreign brokerage expects the market to rise 10 per cent by May 2024 and sees a potential for the market to swing in a wide range, depending on the outcome.

The voting in the world's biggest democratic election will likely commence in April 2024, with counting and the release of results likely on a single day in late May. This, Morgan Stanley said, assumes that the election dates are not advanced, which is a possibility. Advancing the election date  could concentrate the market move into a shorter period, it said.

"If we are right about the pre-election market move, then depending on what the election result is, we believe the market has the potential to swing between 5 per cent and minus 40 per cent - a wide range underpinning how important the elections could be to the market in the short run. The wild swing has historical precedence although we think it could be more acute this time around," Morgan Stanley said.

The foreign brokerage noted that the election results in 2004 were against what the market was pricing in and that the Sensex fell 17 per cent in a single trading session.

Morgan Stanley said If I.N.D.I.A. were able to muster a viable pre-poll alliance, implying seat sharing that results in bilateral contests with the BJP-led NDA, the market could become less bullish and its upside forecast would not materialise.

Overall, it expects the domestic growth to remain strong but a global slowdown is a risk. While Indian equity market correlation to US stocks has declined, any sharp decline (or rise) in US stock prices would influence the market in India, it said.

"Lower crude oil prices would provide flexibility to cut domestic prices, reduce inflation and increase the chance of a rate cut before the end of 2023 or 1Q24 (versus our base case of a rate cut in 2Q24)," it said.

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