NEW YORK - In a recent analysis, Morgan Stanley (NYSE:MS) has set a target for the BSE Sensex at 74,000 by December 2024, which would mark a 14% upside from current levels. The financial institution's optimism is based on several factors that include India's robust domestic growth, oil prices remaining in the $70s or lower, a supportive stance from the Reserve Bank of India (RBI), and the continuation of a government with a majority mandate. These elements are expected to contribute to an environment conducive to growth, with the prediction also resting on an above-average price-to-earnings (P/E) multiple of 24.7 times and annual Sensex earnings compounding at 21.5% through the fiscal year 2026.
Morgan Stanley also outlined three possible scenarios for the Sensex's future trajectory. The base case scenario, which has a 50% probability, aligns with their target of 74,000 for the index and anticipates a strong annual compound earnings growth of 21.5% through F2026E. In what Morgan Stanley considers the bull scenario, with a 30% likelihood, the Sensex could climb even higher to 86,000. This more optimistic forecast is predicated on lower oil prices leading to deeper rate cuts by the RBI and a renewed growth cycle in the United States that could boost global share prices and result in positive bond flows.
Conversely, the bear scenario assigns a 20% chance to the possibility that the Sensex could fall to 51,000. This prediction takes into account potential risks such as an unclear mandate in India's elections, oil prices surging past $110 per barrel, threats to macroeconomic stability, equity multiples de-rating, and slower growth in F2025.
Morgan Stanley's projections are notable for factoring in both domestic and international economic conditions. The firm's analysis suggests that calibrated policy measures by the RBI and stable governance are pivotal to India's market performance. Moreover, global factors like oil prices and US economic conditions are also recognized as influential to India's financial markets.
Investors and market watchers will be closely monitoring these variables as they consider their positions in Indian equities over the next year.
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