- Morgan Stanley is bullish on Indian equities, predicting a major market rally ahead
- The firm targets BSE Sensex at 95,000 by December 2026, a 22% upside from now
- Sensex is cheapest versus gold, supporting a potential long-term market re-rating
Morgan Stanley has turned decisively bullish on Indian equities, arguing that markets are set up for a major rally after one of the weakest relative periods in recent history. In its latest India strategy note, the global brokerage said the current combination of depressed valuations, improving earnings momentum and cautious investor positioning mirrors conditions typically seen near the end of market drawdowns.
The firm has set a base‑case target of 95,000 for the BSE Sensex by December 2026, implying upside of about 22% from current levels. In probability‑weighted terms, Morgan Stanley sees limited downside risks relative to the potential gains, describing the present phase as a rare entry point for long‑term investors.
India's trailing market performance over the past year stands close to historic lows, while relative valuations have fallen sharply. Despite this, the fundamentals underpinning growth remain largely intact, supported by robust domestic demand, policy stability and a recovery in capital expenditure.
Earnings Cycle Is Back—And Markets Haven't Caught Up
A central pillar of Morgan Stanley's bullish thesis is the revival of India's earnings cycle. The brokerage said high‑frequency indicators point to renewed strength across consumption, investment and services, even as markets continue to price in overly pessimistic assumptions.
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India's share of global corporate profits now exceeds its index weight by the widest margin on record, highlighting what the firm sees as a growing disconnect between earnings fundamentals and equity valuations. Morgan Stanley expects positive earnings revisions ahead and said it remains ahead of consensus estimates.
Foreign investor positioning, which has weakened steadily over recent months, further reinforces the case for an upside surprise if earnings momentum continues to improve.
Road to 95,000
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Sensex Cheapest Ever in Gold Terms
Valuation metrics also support a bullish re‑rating, according to the note. Morgan Stanley highlighted that the Sensex is trading at its cheapest level ever when measured against gold, a long‑term benchmark often associated with major market turning points.
At the same time, India's relative price‑to‑book multiples are near historical troughs, even as macro stability improves and policy uncertainty remains low.
Taken together, Morgan Stanley said the setup across performance, valuations, earnings and positioning suggests Indian equities are on the cusp of a new bull phase. While risks from geopolitics and global growth persist, the brokerage believes the balance of evidence points firmly towards a sustained market recovery.
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