Morgan Stanley on 18 August 2011 cut its year-end target for 2011 for the Bombay Stock Exchange Sensitive Index by 15 percent to 18850 stating that India's economic growth and corporate earnings were likely to slow in the following months.
The brokerage also reduced its forecast for India's 2012 gross domestic product growth to 7.4 percent from 7.8 percent and its estimate for the fiscal year ending 31 March 2013 to 7.6 percent from 8 percent.
Morgan & Stanley mentioned that a combination of factors including persistently high inflation, higher cost of capital, cut in the ratio of fiscal spending to GDP, a weak global capital markets environment and slow pace of investment were likely to cause a further slowdown in growth.
Earnings for 46 percent of Sensex companies lagged behind analyst estimates in the three months ended June 2011according to Bloomberg data. That compares with 33 percent that missed forecasts in the previous quarter ending March 2011. The Sensex trades at 13.8 times estimated earnings, the lowest since May 2009, and down from 21.5 times in March 2010.
The Sensex fell 1.3 percent to 16617.42 on 18 August 2011.
The Index closed at 20509.09 in 2010 about 8 percent higher than Morgan Stanley's forecast for the yearend.
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