Super bullish Morgan Stanley sees Sensex at 50k by Dec 2021

NEW DELHI: Morgan Stanley has revised its BSE Sensex target upward to 50,000 points by December 2021 in the base case scenario, saying that the coming growth cycle is not fully priced in. The overseas firm had earlier projected the 30-share index target at 37,300 by June 2021.

The target indicates an upside of nearly 14 per cent from the current levels of around 43,890. At the same time, Morgan Stanley believes that the broader market is likely to outperform large caps in 2021.

“Concentration of market cap and profits may have peaked with the return of the growth cycle. We also think portfolio returns are more likely to be driven by bottom-up stock picking rather than top-down macro forces, so keep sector positions narrow. Return correlations across stocks with the equity market have risen to levels from where they tend to mean-revert,” Ridhan Desai and Sheela Rathi of Morgan Stanley said.

In a research note on November 15, they added domestic cyclical would outperform exports. Rate-sensitive and consumer stocks are also likely to outperform, whereas energy should underperform.

“We add another 100 basis points to financials at the expense of healthcare and also added SBI to our focus list while removing Apollo Hospitals. We are overweight in consumer discretionary, industrials, financials and utilities. We are underweight in technology and energy,” they said.

In the bull case scenario (probability 30 per cent), Morgan Stanley believes that the Sensex can hit 59,000 by December next year, while it would be around 37,000 in the bear case (20 per cent probability).