International brokerage firm Morgan Stanley predicts the markets will grow, with the Reserve Bank of India (RBI) being accommodative, if Narendra Modi's government wins a second term in the general elections 2019.

"We set our June 20 target for BSE Sensex at 45,000 and Nifty at 13,500, an upside of 15 percent from here. We are adding Asian Paints and Interglobe Aviation to the Focus List at the expense of Adani Ports and Eicher Motors," it said.

In the morning session on Thursday, markets cheered the leading trend of the BJP-led NDA across Indian states. Major stock market indices Sensex and Nifty 50 crossed their respective 40,000 and 12,500 mark during the day.

"This likely continuity in administration is source of comfort for stocks due to an accompanying policy predictability. We expect some shifts in the policy regime," said the brokerage commenting on the clear majority win expected for the ruling government.

It also said that it expects the RBI to be more accommodative and the country's economy to come out of its slowdown seen in the recent past.

The Indian research unit at Morgan Stanley expects the earnings to be heading to a new cycle and domestic flows to return with strength, if NDA government returns.

"We expect the inflation framework (low food prices and positive real rates), fiscal consolidation, infrastructure spending, FDI focus and strong external affairs policies to continue. The new administration may bring some changes such as increasing cash transfers to poor people (hopefully subsuming existing subsidies), more emphasis on portfolio flows (which lost out in the previous five years), focus on India's external trade and social/constitutional reforms (like Article 370). Legislation is a consensus driven activity given that the NDA remains in minority in the Upper House, for now," it said in a note.

On the international factors, it said that oil prices, US Fed rates, US-China trade tensions are key risks to the equity markets.

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