Sensex may touch 19,954 level by December: Morgan Stanley
Morgan Stanley macro forecasts said the country's real GDP may grow at 6.8 percent in FY14.
Mumbai: American investment bank Morgan Stanley today said the Sensex could reach 19,954 by December, a gain of 24 percent from the current levels.
Admitting that this gaining streak will be tempered by volatility, Morgan Stanley strategist and India equity research head Ridham Desai said, "Our probability-weighted outcome for the Sensex is 19,954 points for December-end 2012, implying a 24 per cent upside."
The Sensex closed at 16,454.30, rising 2.7 percent today.
On the sectors on its radar, Desai said, "We prefer mid-caps and our sectoral calls are still narrow. Consumer durables and technology are favoured sectors and banking sectors should be avoided."
"The current below-trend GDP growth and high inflation levels will keep the economy under pressure," Morgan Stanley chief strategist for Asia and emerging markets Jonathan Garner told an investor summit organised by the bank in Mumbai.
Morgan Stanley macro forecasts said the country's real GDP may grow at 6.8 percent in FY14, while global economy is likely to grow at 4 percent, developed markets at 1.6 percent and the developing world by 6.2 percent in 2013.
On the rupee, he said the continued deterioration in the country's current account is also likely to keep the rupee under pressure for some more time.
"The current account deficit trajectory is weaker post-credit crisis and India is the only country in Asia with current account deficit," Garner said, adding that the country is caught between indecisiveness on policy actions and a fragile global environment and has run up huge high twin deficits last fiscal.
"We have low conviction on margin recovery in 2013. The case is feeble because it rests on relative performance of the current and fiscal accounts -- the two macro economic variables which are prone to the impulse of policy actions," he said.
Commenting on world markets, Garner said key catalysts for the market are China's monetary and fiscal policy stance and the second Greek election and its aftermath. China may see its first rate cut in June this year, he said.
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Morgan Stanley cuts its bear-case scenario index target for the BSE Sensex to 16,200 from 17,912 while raising the probability of such a scenario to 35 percent from 20 percent.
Morgan Stanley pegged BSE Sensex earnings growth at 5 percent, 23 percent and 24 percent for financial year 2018, fiscal 2019 and fiscal 2020, respectively.