Morgan Stanley says Indian market likely to outperform

MUMBAI: Morgan Stanley, in its latest Indian strategy report, has observed that the country's market is likely to outperform and said there is a 40 percent probability of markets turning bullish which could take the sensex to beyond 19,000 levels by December.

"The market performance depends largely on the government action. In the context of the quality of the new government's mandate, the optimism shown by the market may not be misplaced," the report said.

"A global market sell-off remains a key risk to absolute performance in Indian equities though we think Indian equities will likely outperform," it said.

The report has predicted the sensex level in scenarios like bull and bear market and what it calls a base case. It said there is only 10 per cent probability of a bear phase in which case the sensex could tank to 8,600 levels.

There is a probability of 40 percent of a bull case and sensex could hit the 19,000 mark by the end of 2009 if the markets turn bullish, its research report said.

 However, the bull case for the market assumes factors like recovery in global growth, strong policy action from the government, lower non-performing assets among others.

Ridham Desai, Managing Director, Morgan Stanley Equity Research said it was difficult to predict whether the current uptrend in the market is a beginning of a new bull market.      Even if that is the case, we would come to know about it only with the benefit of hindsight, he said.

Desai pointed out the world is awash with liquidity and India is getting its share of it through FIIs. He said he expects consumer sectors like auto, infrastructure, banks to do well during the year while defensive sectors like health care may take a breather.