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Sensex @ 36000

The S&P BSE Sensex reclaimed mount 30K earlier this week to hit a fresh record high and if earnings recovery happens better than estimates, then Sensex could well hit mount 39K by December 2017, Morgan Stanley said in a report.
Earnings revisions will likely turn positive in the coming six months after six years in negative territory. Valuations are not yet stretched against history, other markets and bonds.
Rising demand for equities from domestic households and potential M&A activity could take multiples higher in coming months, said the report authored by Ridham Desai and Sheela Rathi.
Morgan Stanley’s December 2017 target, the BSE Sensex would trade at 16x one-year forward earnings, similar to its historical average. The bull-case multiple would be 17x our bull-case earnings and about 19x our base-case earnings.
There is a 30 percent probability that Sensex could trade at 39K on policy reforms as well as global factors. The much talked about earnings growth accelerates to 19 percent in FY2018 and about 27 percent in FY2019.
The Sensex shall move to 36 K is primarily based on the premise that the Market Companies growth around 18 - 20 percent . If the earnings fall flat achieving this level shall be difficult .  
The investment bank is positive on stocks which include names like IndusInd Bank, RIL, Jubilant Foods, HCL Technologies, Infosys, Bharat Financials, Glenmark Pharma, M&M, and Bajaj Auto.
Morgan Stanley explains that the growth cycle is fast turning and this could be the beginning of a new growth cycle. “If you are ready to humour us then we would take this further by saying that earnings could compound at 20 percent over the coming five years (in the 2003 to 2008 cycle, index earnings compounded 40%),” said Ridham Desai.
The growth cycles are accompanied by an expansion in multiples and at least under this scenario the Nifty likely triples in five years.
Morgan Stanley does not find valuations to be that rich and it depends more on what you are comparing it with. “If one is comparing valuation relative to US equities this is about as attractive as Indian stocks have been in a while,” said the note.

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