The Budget rally coupled with better than expected earnings for India Inc could take the benchmark Sensex to 61,000 mark by the end of the calendar year, believes brokerage Morgan Stanley. Hailing the reformist measures announced in Budget 2021, the brokerage said they could raise the share of corporate profits in GDP.
"If these measures are executed well, this budget has the potency to lift the share of corporate profits in GDP, augmenting the strategic shift in government policy when corporate tax rates were cut in September 2019," the brokerage firm said.
On February 1, FM Nirmala Sitharaman presented a growth-oriented Budget, with higher fiscal deficit limits and privatisation plans that buoyed investors. Buoyed by the Budget, Sensex has gained 4,189 points in last four sessions.
The Budget rally has increased investor wealth by Rs 13.99 lakh crore.
"Our view is that the budget proposals may promote a new private investment cycle, with a recovery in domestic equity flows and overall growth," the brokerage firm added. However, the brokerage has revised its year-end target for Sensex to 55,000 from 50,000 earlier.
In November 2020, the brokerage had given a Sensex target of 50,000 for 2021-end.
The revision comes after Sensex closed above 50,000 level for the first time in previous session. Morgan Stanley said the Budget has laid foundation for Indian equity markets to catch-up with their emerging market peers in terms of stock market performance.
The brokerage prefers stocks in cyclical sectors, interest rate sensitive sectors and midcaps. The market's most bullish movement could occur if corporate earnings rise 37 per cent in the next financial year and the US dollar enters a sustained bear market that will accelerate foreign inflows.