By December 2023, Morgan Stanley expects the Sensex to reach 80,000, but there is a caveat

If India is included in global bond indices, which might result in $20 billion in inflows over the following 12 months, the foreign brokerage company Morgan Stanley predicts that the Sensex would reach 80,000 by December 2023.

The inclusion of India in international bond indices has already been delayed. Early 2022 was when Morgan Stanley initially predicted it would happen, but a September article from Reuters suggested that it would take longer. The news source claims that prior to the inclusion, tax complications and bond settlement rules must be resolved.

Other factors, according to Morgan Stanley, that could push the Sensex to 80,000 include a sharp correction in the price of commodities like oil and fertilizer, as well as earnings growth compounding at a rate of 25% per year over the period of FY2022–25.

The base case target set by the brokerage business for the Sensex is 68,500, assuming that the repercussions of the crisis between Ukraine and Russia do not persist into 2023 and that the US does not enter a recession. It continued, "Government policy should remain encouraging, and the RBI should carry out a calculated exit."

According to Ridham Desai, the India equities analyst at Morgan Stanley, the profit share of the GDP would increase from its present level of 4% to 8% over the next four years, meaning that broad market earnings may compound at a pace of 20–25% annually.

Sensex may fall to 52,000 in the worst-case scenario, according to the business, if commodity prices stay high, the RBI tightens policy forcefully, and the US and European economies are still experiencing recession. The likelihood of this, according to Morgan Stanley, is 20%.

Desai continued in his equity strategy note, "An up-trending profit cycle, a likely peak in short rates, and ebbing global macro risks relative to 2022 make the case for absolute upside to Indian stocks.

Given its relative valuations, India's trailing outperformance could slow down in the first half of 2023, he said, adding that other emerging markets are likely to benefit from a more stable global environment.

Nifty's TTM valuation at 23.27 PE is currently more than 630 basis points higher than the PE over the previous ten years. The price-to-earnings ratio (abbreviated as PE)

On November 28, the Sensex and Nifty both closed at all-time highs. The Sensex finished the day up 182.21 points at 62,475.85. Nifty reached a record high of 18,613.20 before closing at 18,553.60.