The BSE Sensex reclaimed 50,000-mark in intra-day deals on Tuesday, a day after Finance Minister Nirmala Sitharaman presented the Union Budget 2021 in the Parliament. The index jumped over 8 percent or over 3,800 points in just 2 sessions as investors cheered the Budget announcements.

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In a Budget review note, global brokerage firm Morgan Stanley raised the Sensex's December 2021 target to 55,000 from 50,000 earlier, indicating another 10 percent upside from the current levels.

"The lack of new income tax, the push for growth mainly via higher infrastructure spending and a refreshed approach to monetize government assets have buoyed the market sentiment," the brokerage said in the report.

It expects Indian stocks to regain their lost relative ground to EMs and continues to prefer cyclical sectors, rate sensitives and mid-cap stocks.

Morgan Stanley pointed out that the three key themes from the Budget 2021 are: Very gradual fiscal consolidation glide path with looser-than-expected fiscal policy; good quality spending mix and reasonable assumption on fiscal math; and focus on privatisation, asset monetisation and long-term funding for infrastructure investments.

The brokerage further noted that the measures to make the financial sector more robust including a new DFI, an asset reconstruction company, a new security market code, higher FDI in the insurance sector and liquidity for depositors in banks under duress, will be very positive.

“If these measures are executed well, this budget has the potency to lift the share of corporate profits in GDP augmenting the strategic shift made in government policy when corporate tax rates were cut in September 2019. This augurs well for a new private investment cycle, a recovery in domestic equity flows and earnings growth," noted the brokerage

It believes the overall approach of the fiscal policy is in line with the message from the Economic Survey, which made a case for active fiscal policy and the focus on growth for creating debt sustainability.

(Edited by : Ajay Vaishnav)