The bullish stance by global brokerage firms on Indian markets stems from the robust rally markets have registered since the crash in March. Indian benchmark indices have rallied over 60% from the lows hit in March, while making new record highs this week.
Consistent buying in equities pushed markets to new record high on Tuesday as news of another promising coronavirus vaccine supported hopes of a quicker economic recovery. The Sensex breached 44,000-levels for first time in early trade to hit intraday high of 44,161.16. At 10:48 am, the Sensex was 43,783.70, up 145.72 points or 0.33%. The Nifty advanced 37.75 points or 0.30% at 12,818.00.
Investor sentiment was boosted after Moderna Inc said its experimental covid-19 vaccine was 94.5% effective in preventing infection based on interim late-state data. The Cambridge, Massachusetts-based firm became the second drug maker, after Pfizer Inc, to announce promising trial data in the development of a vaccine to defeat the pandemic.
"The latest news on vaccine from Moderna is a major positive for economy & markets. Moderna vaccine appears better than that of Pfizer in terms of effectiveness & temperature requirements. Looks like the threat from covid will be over by mid-2021. A major trend in markets is the shift from growth stocks to value stocks as evidenced by Russel 2000 touching all-time highs. In India too a shift to value stocks in the broader market can be expected," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
As equities staged a massive recovery post covid lows hitting global brokerage firms have started raising their targets for Indian markets reiterating their bullish stance. Global brokerage firms Morgan Stanley, Goldman Sachs and Nomura feel that the Indian markets have more legs to the rally as economic indicators show recovery while corporate earnings show that revival is on the track.
Morgan Stanley has upgraded target for Sensex to 50,000 by December 2021 from an earlier target of 37300 for June 21 as it feels that the coming growth cycle is not fully priced in, hence there is more upside to the index. The global brokerage firm has also increased FY2021, FY2022, and FY2023 earnings per share (EPS) estimates for the BSE Sensex by 15%, 10%, and 9%, respectively indicating between 6% and 7% above consensus estimates. The target for Sensex imply that the index would trade at a forward price to earnings (PE) multiple of 16 times.
“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," Ridham Desai and Sheela Rathi, equity strategist, Morgan Stanley wrote in a note on 15 November.
Last week, Goldman raised Indian equities to overweight on hopes that earnings recovery will lead rally and upgraded Nifty target to 14,100 by 2021 end. Nomura also had increased its target of Nifty 13,640 by December 2021 on expectations that capital flows resulting from improved risk sentiment will drive stocks in the near term.
The bullish stance by global brokerage firms on Indian markets stems from the robust rally markets have registered since the crash in March. Indian benchmark indices have rallied over 60% from the lows hit in March, while making new record highs this week. Improving economy indicators and recovery in earnings have also boosted confidence for Indian equities.
Foreign institutional investors (FIIs) have pumped in $4.15 billion in Indian shares in November so far, highest in last three months while the inflow stands at $10.70 billon for the whole year.
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