Brokerage house Morgan Stanley has maintained its target for the BSE Sensex to reach 62000 at the end of the year. The brokerage house said that there have been some positive fundamental changes in the structure of the domestic market. Due to this, the Indian markets have been seen showing strength despite global turmoil and steep rise in crude oil prices.
Domestic benchmark indices remained largely flat in the quarter ended March, despite the US Fed raising interest rates for the first time in four years and Russia’s invasion of Ukraine. The Russo-Ukraine War caused a huge jump in commodity prices all over the world. Crude oil prices were seen crossing $100 per barrel for the first time in the last 8 years.
Morgan Stanley in its note has said that the Indian equity market has largely tolerated the upside shocks caused by supply constraints in oil prices, indicating that the Indian market structure has several changes. There have been positive changes.
Morgan Stanley in its recently released note has highlighted the reasons why Indian markets have remained strong despite global macroeconomic uncertainties.
1. Election Results and Government Policies
Morgan Stanley believes that the recent election results of five states have given the government a mandate to pursue its economic reform policies. The government can now take forward its policies to increase private investment in the country, encourage growth, generate employment.
2-Profit Cycle and Domestic Investor
Morgan Stanley says there are signs that India Inc is entering a new profit growth cycle after a hiatus of 15 years. Due to this, continuous buying is also being seen in the market from the side of domestic investors. Morgan Stanley also says that selling of FPIs can be portfolio re-balancing. There is no other negative reason for this.
3. Strong FDI and Capex Focus
Morgan Stanley says that due to all the incentives given by the government for foreign investment, there is a very good trend in multinational companies regarding India. At present, the improvement in the sentiment of multinational companies regarding India is visible at its all-time high. Due to which a huge amount of FDI is seen coming into the country. Going forward, a new capex cycle can be seen by the companies in the country, which will give a push to the growth in the country.
4. Foreign Investment
Morgan Stanley has said in this report that the increase in foreign direct investment (foreign direct investment) compared to foreign portfolio investment is an indication that India’s current account deficit is changing significantly in funding. Morgan Stanley also says that India’s current account is now less dependent on global capital market conditions than before. This makes it easier for the government to take policy decisions.
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5. Flexibility in policies
Morgan Stanley says that the decreasing dependence of India’s current account on foreign portfolio flows is giving the government more freedom than before to modify its policies. For example, earlier in 2013, due to the rise in US bond yields and the rise in crude oil, the rupee had fallen flat. But this time we didn’t see anything like that happening. Morgan Stanley has said in this note that the Indian government is currently working in an era of greater fiscal deficit than normal, but despite this, there is no immediate need to reduce it. Even the RBI has not felt the need to go back on its soft monetary policy stance. At the same time, the US Fed seems to be coming out of its easy money policy.