Morgan Stanley predicts strong market conditions for 2009

Morgan Stanley predicts strong market conditions for 2009
The Hindu Business Line, June 5, 2009, Page 13

‘Next few quarters will be rather challenging for IT cos’.

Our Bureau, Mumbai

If the global markets do not throw in more surprises and if the Indian government does go ahead with reforms, the Sensex could be trading at the 19,000 levels by the end of the current calendar year, said Mr Ridham Desai, Managing Director at Morgan Stanley Equity Research.

Even if there is bad news globally, the market here will not touch the lows it did in October of last year, he said.

Corporate earnings will rise over the next two fiscal years as there would be an increase in domestic demand with more consumers spending and with improved sentiment.

Sectors to watch

According to Mr Desai, the sectors to look out for are the consumer sectors (such as auto), industrial sector(especially the infrastructure sector given that the Government will provide impetus to spending) and financial sector (mainly the banks).

One should stay away from global sectors: “There is no robust recovery seen in sectors such as materials. Defensive sectors such as health care will take a breather now as they have seen quite a bit of a run up recently,” said Mr Desai.

He also added that the next few quarters will be rather challenging for the IT companies, given the current dollar rates: “These companies will suffer from tepid overseas demand. We could see these shares becoming cheaper in the next six months.”

Betting on households

“Households are under invested in the equity markets here. With a long-term view we will see them beginning to invest more. They will look at investing through maybe insurance companies or through mutual funds rather than directly. So we could see domestic institutions playing a larger role.”