Sensex Can Scale 105,000-Mark By December 2025, Says Morgan Stanley

BSE Sensex, one of India's frontline indices, can scale the 105,000-mark in a year from now—by December 2025—in a bull case scenario, Morgan Stanley said in a note issued on Friday.

This would mark a climb of 28.5% as compared to the index's current level. According to the global brokerage firm, there is a 30% probability of Sensex touching the 105,000 target.

The bull run could take place if global oil prices consistently remain below $70 per barrel, and domestic inflation slides significantly, which would prompt the Reserve Bank of India to slash benchmark lending rates, it said.

The continuation in US growth cycle, global share prices moving positively, and foreign flows coming into India are part of the assumptions.

In this scenario, the Sensex earnings are estimated to compound at 20% annually from fiscal 2024 to fiscal 2027, Morgan Stanley said.

On the flip side, a bear case scenario may lead the BSE Sensex to slide by 14.5% till December next year to 70,000 level, Morgan Stanley said.

There is a 20% probability of this outcome, the brokerage suggested, adding that this could happen if oil prices surge past $110 per barrel-mark, and the RBI ends up tightening to protect macro stability, "and global growth slows meaningfully and the notably the US slips into recession".

In this scenario, the Sensex earnings are expected to compound at 15% annually from fiscal 2024 to fiscal 2026, with "perceptibly lower growth in F2026 and equity multiples de-rate to reflect poor macro conditions", it added.

The base case scenario with a 50% probability is that the Sensex would rise by 13.8% to 93,000 level, according to Morgan Stanley.

"This level assumes continuation in India's gains in macro stability via fiscal consolidation, increased private investment and a positive gap between real growth and real rates," the note stated. Robust domestic growth, no recession in the US and benign oil prices are also part of this assumption, it added.

In this scenario, the Sensex earnings are estimated to compound at 17% annually through fiscal 2027. "In our base case, we are 15% ahead of consensus to F2027," the brokerage said.

On the monetary policy front, a modest reduction in interest rates and a positive liquidity environment is expected under the base case, it added.

Morgan Stanley, in its note, stated that India is "still the market to beat", and the country will continue to be amongst the best emerging markets in 2025.

With strong earnings, macro stability and domestic flows, it is hard to argue against India's investment case, it said. This is due to a strong macroeconomic stability, and an earnings growth forecast of 18-20% annually over the next four to five years, the note added.

However, potential global growth risks "plus a bunching up of IPOs" and near-term growth concerns present challenges, Morgan Stanley stated.

The domestic investors will closely watch the next earnings season due to recent weakness, the brokerage pointed out. "But we think earnings remain in an upcycle and a recovery is on hand," it added.