Home / Markets / Stock Markets /  Sensex may hit 80,000 by Dec 2023, says Morgan Stanley. But there's a catch

BSE Sensex is expected to hit 80,000 by December 2023 if India is included in the global bond indexes and prices of commodities including oil and fertilisers correct sharply and earnings growth compounding at the rate of 25% annually over FY2022-25, according to analysts of foreign brokerage firm Morgan Stanley.

India might have to wait until early next year to see its bonds enter the JPMorgan emerging market global index. According to reports, the inclusion has been delayed on account of prickly operational issues.

The inclusion of India in the global bond indexes could result in nearly $20 billion of inflows over the subsequent 12 months, the Wall Street brokerage said in a note, while making a bull case for a 30% chance of the blue-chip index hitting the number.

Local bond settlement rules, tax complexities and the way in which investors will repatriate dollars are among the operational issues that still need to be resolved, a Reuters report had stated earlier. Index investors tend to favour international settlement platforms such as Euroclear but India has said it wants to settle bonds onshore, like China.

The government and the Reserve Bank of India will likely sort out some of these issues by the end of this year. If resolved, an announcement on India's inclusion could come early next year.

‘50% chance of Sensex hitting 68,500 by 2023-end’

The brokerage firm also sees a 50% chance of the Sensex hitting 68,500 by the end of 2023, assuming that the effects of the Russia-Ukraine war do not spill over into next year, domestic growth continues its strong path and the US does not slip into a protracted recession.

"Government policy should remain supportive, and the RBI should execute a calibrated exit," the brokerage said in a note.

"India is likely to have better growth than most parts of (emerging markets), a sustained domestic bid, a relatively strong macro environment plus light positioning by foreign portfolio investors," as per Morgan Stanley analysts.

Meanwhile, Morgan Stanley's Ridham Desai expects profit share in GDP to double from its current level of 4% to 8% over the next four years, indicating that broad market earnings could compound annually at 20-25%.

In a bear case scenario, the brokerage sees Sensex dropping to 52,000 if commodity prices remain elevated, central bank tightens aggressively and recession in the US and Europe drag down India’s growth. There's a 20% probability of this, as per Morgan Stanley.

Markets hit fresh all-time highs

Indian stocks rose for the fifth session in a row today, with both the benchmark indexes scaling record highs, led by gains in oil marketing companies as crude prices slid following protests in major Chinese cities over Covid-19 controls.

Amid global weakness, the indexes opened lower. But they reversed course to hit all-time intraday highs as oil prices continued their slide on demand worries from top importer China.

The 30-share BSE Sensex surged 211.16 points or 0.34% to settle at 62,504.80, its fresh record closing high. During the day, it rose 407.76 points or 0.65% to its lifetime intra-day peak of 62,701.40.

RIL jumped the most by 3.48%, followed by Nestle, Asian Paints, Bajaj Finserv, Wipro, ICICI Bank and IndusInd Bank among the Sensex pack.

Tata Steel, HDFC Bank, Bharti Airtel, HDFC and Mahindra & Mahindra were among the laggards.

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