Analysts at Morgan Stanley have updated their outlook for the Indian markets, and they now expect the Sensex to hit the 107,000 mark by December 2026 in a bull-case scenario, translating into an upside of 26 per cent from current levels.
Photograph: Danish Siddiqui/Reuters
Earlier, they had expected the index to hit the 100,000 mark by June 2026 in a bull-case scenario, to which they had attached a 30 per cent probability.
India is ending 2025 with its worst relative performance versus the emerging markets (EM) since 1994, Morgan Stanley said.
Relative valuations, they believe, have corrected meaningfully, and possibly troughed in October 2025.
India, Morgan Stanley analysts wrote in a recent report, is set for a positive growth surprise in the coming months, and the markets have a case for rerating.
Their base-case for the Sensex level by December 2026 is 95,000 levels, to which they have attached 50 per cent probability.
For the index to rally to 95,000 mark, Morgan Stanley expects continuation in gains in macro stability via fiscal consolidation, increased private investment, and a positive gap between real growth and real rates.
Robust domestic growth, steady global growth, and benign oil prices are also part of their assumptions.
“In our base case, we anticipate a resolution to the tariff situation between India and the US in the weeks ahead.
“We use another 25 basis points (bps) reduction in short-term interest rates, and a positive liquidity environment as the base case for monetary policy,” wrote Ridham Desai, managing director and chief India equity strategist, Morgan Stanley, in a coauthored report with Nayant Parekh.
The report added: “We do not anticipate a bunching of issuances, and the retail bid keeps its nose ahead of the supply.
“Sensex earnings compound at 17 per cent annually through 2027-28 (FY28).”
Risks to forecast
On the other hand, in case crude oil prices surge past $100 a barrel mark, the Reserve Bank of India (RBI) ends up tightening to protect macro stability, global growth slows meaningfully, and the US slips into recession, Desai sees the Sensex slip to 76,000 mark by December 2026 and attaches a 20 per cent probability to this.
Deterioration in trade conditions between India and the US, Sensex earnings compound at 15 per cent annually over FY25-FY28 with perceptibly lower growth in FY26, and equity multiples de-rate to reflect poor macro conditions are some of the factors Desai believes can trigger a market fall and take the Sensex around 10 per cent lower from the current levels to 76,000 mark by December 2026.
