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Budget to boost earnings growth, bullish cap goods: Morgan

Desai says the Budget will help sustain growth over the longer term. The higher share of revenues for states will encourage many of the progressive minded states to embark on capex plans

Morgan Stanley Managing Director Ridham Desai says the Budget proposals strengthens the case for an earnings upgrade.

In an interview to CNBC-TV18, Desai says the Budget will help sustain growth over the longer term. The higher share of revenues for states will encourage many of the progressive minded states to embark on capex plans. This in turn, should help revive the investment cycle in the country.

He is bullish on shares of private banks and capital goods companies. Among non-cyclicals, he is bullish on IT. He, however, recommends avoiding PSU banks as they are unlikely to participate in the early stage of the uptick in the credit cycle. Cement and steel are the other two sectors that Morgan Stanley is bearish on.

Among the positives in the Budget, Desai said at least 20 proposals focussed in improving the ease for doing business in the country.

He sees the bull market in India continuing, and expects corporate earnings to grow around 24 percent over the next couple of years, and sees them compounding 20 percent over the next five years.

Morgan Stanley has retained its Sensex target of 32,500 by December. Desai does not see any reason for the maret to go through a deep correction.

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