Sensex To Touch 89,000 Levels By June 2026, Says Morgan Stanley

Morgan Stanley has revised its Sensex target to 89,000 for June 2026 — representing an 8% upside from current levels — rolling forward from its previous December 2025 target of 82,000.

The brokerage views the recent drawdown in Indian equities from their September 2024 highs as a compelling opportunity to invest in India’s long-term structural growth story. Despite global market volatility, India’s robust macroeconomic fundamentals and resilient earnings outlook continue to position it as a core investment destination.

While the pullback creates value for long-term investors, Morgan Stanley cautions that India’s low beta nature means it will likely underperform during a strong global bull market. Nonetheless, a modest 1% upgrade to earnings per share estimates has been made, reflecting an upward revision in GDP growth forecasts.

Despite recent global uncertainties, Indian markets have remained orderly with limited volatility spikes, the brokerage said in its report on Wednesday.

Importantly, foreign investor positioning is at its weakest since Morgan Stanley began tracking the data in 2000 — a contrarian positive, especially as there are early signs of a shift in sentiment towards India.

According to the brokerage, long-term case for Indian equities remains intact, underpinned by:

• Macro Stability: India enjoys improving terms of trade, a narrowing primary deficit, and low inflation volatility, which continue to foster economic stability.

• Earnings Growth: Mid- to high-teens annual earnings growth is expected over the next three to five years, driven by a revitalising private capex cycle, strengthening corporate balance sheets, and rising discretionary consumption.

• Ample Domestic Capital: The market benefits from a deep pool of domestic risk capital, bolstered by persistent retail participation, which underpins a structurally strong equity culture.

• Supportive Policy Environment: A dovish Reserve Bank of India and stable oil prices add to the list of supportive macroeconomic levers.

• Geopolitical Stability: Recent developments have reinforced India’s national security stance and highlighted advances in military capabilities, offering a measure of geopolitical reassurance to investors.

According to Morgan Stanley, potential upside catalysts include further RBI rate easing, tax relief via GST cuts, a favourable trade agreement with the US, and positive global and domestic growth data. While, the key downside risks include a global recession, challenges in public sector productivity, slow tech sector adaptation to AI, and fiscal strain at the state level.

With macro tailwinds expected to recede, India is entering a stock picker’s market, according to the brokerage. Their sector preferences reflect this view: overweight on domestic cyclicals — particularly financials, consumer discretionary, and industrials — while maintaining underweight positions in energy, materials, utilities, and healthcare. The portfolio is sectorally balanced, with average active sector positions of just 80 basis points and no bias toward market capitalisation.