Morgan Stanley has delivered a bold and optimistic outlook for Indian equities, projecting that the BSE Sensex could climb to 107,000 by December 2026 in its bull-case scenario. Even in its base case, the brokerage expects the index to reach 95,000, implying a potential 13% upside from current levels. This forecast comes at a crucial juncture, as Indian markets prepare to rebound after a period of underperformance in 2025.
Why Morgan Stanley is Bullish on India
The global brokerage highlights several factors underpinning this ambitious target:
- Foreign investor positioning: Currently described as “the lightest in history,” leaving ample room for renewed inflows.
- Valuations: After years of frothy levels, valuations have normalized, creating a healthier entry point for investors.
- Domestic fund flows: Structural strength in local investments continues to provide resilience, ensuring steady liquidity.
- Macro tailwinds: Policy easing, supportive government measures, and a renewed earnings cycle are expected to drive growth.
- Global conditions: The bull-case scenario assumes persistently low oil prices (below $65 a barrel) and favorable global trade shifts.
From Stock-Picking to Macro-Driven Trade
Morgan Stanley believes India is set to “regain its mojo” in 2026, transitioning from a stock-picking market to one driven by macroeconomic factors. This shift signals a broader recovery phase, where investors may benefit from sector-wide momentum rather than isolated opportunities.
Lessons from 2025’s Underperformance
India’s equity markets endured their weakest relative performance against emerging-market peers in over three decades during 2025. Slowing growth and stagnant valuations weighed heavily on sentiment. However, Morgan Stanley argues that this painful stretch has set the stage for a sharp recovery, with earnings expected to grow at nearly 19% annually through FY25–28.
What Investors Should Watch
- Policy direction: Continued reforms and fiscal discipline will be critical.
- Global oil prices: Sustained low levels could significantly boost India’s macro stability.
- Foreign inflows: A reversal in global investor positioning could accelerate the rally.
- Domestic consumption: Strong household demand remains a cornerstone of India’s growth story.
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Conclusion
Morgan Stanley’s projection of Sensex at 107,000 by 2026-end is more than just a number—it reflects confidence in India’s structural strengths and its ability to rebound from cyclical setbacks. With normalized valuations, strong domestic flows, and supportive macro conditions, Indian equities may be entering their most promising phase in years. For investors, the next 12–24 months could be pivotal in positioning portfolios to ride this anticipated upswing.
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