Morgan Stanley’s Ridham Desai expects Sensex & Nifty earnings to triple in next 5 years

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The Indian stock market is expected to triple in the next 5 years, believes Ridham Desai, Head-India Equity Research & India Equity Strategist, Morgan Stanley.

According to Desai, compounded Nifty earnings will be around 20 percent in the next 5 years.

“...if you compound at 20 percent Sensex and Nifty earnings which means market will triple in the next 5 years,” Desai said at Morningstar Investment Conference 2017 held in Mumbai today.

He also talked about the big digitisation push that is leading to a huge surge in GDP, which will reach USD 6 trillion with the equity market cap rising to USD 6.1 trillion.

He further explained that India has done a lot in the last 3 years and is set on the path for robust growth in the next 10 years.

“Two things JAM (Jan Dhan, Aadhaar and Mobile) and GST (Good and Services Tax) will be a boon for the country.”

He said that right now the news on GST is bad but as we move forward GST will become a boon for India.

Desai expects GST will boost tax revenues for the government and bring down public debt to GDP. Desai also expects GST may lift corporate profits.

The investors should remain invested rather than attempting to time the market, Desai said.

He ended his speech by saying that currently equities appear to be cheaper than bonds, as bonds are trading with a high P/E ratio.

“Bonds are trading at 16 times earnings. The bond cash flow, the coupon that you get, will terminate after 10 years. The dividends you get go way beyond the 10-year time-frame. This implies that equities are actually much cheaper, and that’s because bond yields are very low compared to India’s own history,” he said, adding that if the yields fall further, equity will become even more attractive.