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Far from pulling away their crucial support to the United Progressive Alliance government at the centre, both the Samajwadi Party and the Bahujan Samaj Party were likely to facilitate a smooth sail for the national government during the winter session of Parliament commencing Today.
Highly placed sources in both political parties have clearly indicated that their leadership had taken a conscious decision to continue support to the UPA. However, they were both discreetly taking care to avoid giving the impression that they were completely sold to the Congress-led centre.
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Morgan Stanley sees 26% upside potential for Sensex
Global financial services firm Morgan Stanley says it expects the BSE's benchmark index, the Sensex, to rise nearly 26% to 23,079 points by December 2013.
It said steady monetary easing at home and abroad, a pick-up in infrastructure spending and stability in crude oil prices will drive growth in the stock market. It also said cyclical sectors such as financials, industrials and energy will lead the growth as opposed to the defensive sectors.
Action from global central banks has reduced India's tail risks from macro stability tribulations, including high external deficit, and this is now evidenced by declining correlations in the equity market," analysts led by India strategist Ridham Desai said in a note on Tuesday.
"The correlation of stocks with the Sensex is approaching lows, warranting wider sector positions. Cyclicals look ultra cheap versus defensives, supported by a likely trough in earnings growth... Small- and mid-caps look very attractive," the note said.
While poor domestic liquidity, slowdown in policymaking and higher inflation could go against the growth thesis, broad market earnings growth may have bottomed out and will "accelerate" from here Morgan Stanley said. However, earnings face a risk of falling investment rates and margins may not improve from here, it said.
"Macro conditions could worsen due to high twin deficits. Our proprietary leading indicator for broad market earnings suggests that growth will likely rise to average in the double-digits in the second half 2013 and further to around 20% in 2014," the note added.
While Morgan Stanley assigned a 60% probability to the scenario where Sensex grows by 26%, it said that there are chances that it could also surge 53% to 28,137 on recovery in global growth, strong policy action and interest rate cuts. On the other hand, the benchmark could fall to 17,918 on weak policy action, continuing tight monetary policy and oil price shocks, it added.
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Indian stocks are the top selection among the so-called BRIC nations next year at JPMorgan Chase & Co because of improving policy and easier monetary conditions in the country.
We remain constructive on Indian equities as we go into 2013," JPMorgan analysts led by Adrian Mowat and Sunil Garg wrote in a report on Monday. The brokerage is underweight on China, where the "key concern is profits as capacity continues to grow faster than demand," they said.
The 30-stock Sensex trades at 15 times estimated earnings, compared with a multiple of 16 for Brazil's Bovespa Index, 5.6 for Russia and 9.6 for China. The MSCI Emerging Markets Index (MXEF) trades at a multiple of 11.2, the data show.
JPMorgan said it's also overweight on the Philippines as the nation's consumption is picking up, and on Thailand because of robust domestic demand and low interest rates. The brokerage lowered South Korea, Taiwan and Singapore to underweight.
Foreigners have purchased a net $18.7 billion of local shares this year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. India's gross domestic product will increase 5.8% in the year through March 31, the Reserve Bank of India said on October 30, the slowest pace since 2003.
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