Morgan Stanley sees Sensex at 1,00,000 in bull case, base target raised to 89,000

Despite global uncertainties, Morgan Stanley argues that India’s fundamentals remain intact. Reuters

Morgan Stanley has reiterated its bullish stance on Indian equities, calling the recent correction from September 2024 highs a buying opportunity. In its latest mid-year outlook, the brokerage raised its Sensex target for June 2026 to 89,000, implying an 8 percent upside from current levels. In a more optimistic scenario, it sees the index touching 1,00,000.

Despite global uncertainties, Morgan Stanley argues that India’s fundamentals remain intact. It cites strong macroeconomic stability—low inflation volatility, improving terms of trade, fiscal consolidation, and a dovish central bank—as key pillars supporting growth. Corporate earnings are expected to grow at mid-to-high teens annually over the next three to five years, driven by a revival in private investment, improving balance sheets, and rising discretionary consumption.

The firm has marginally increased its earnings per share (EPS) estimates for the Sensex, reflecting its upgraded GDP forecast. It expects Sensex earnings to compound at 16.8 percent annually through FY28 in its base case.

The report highlights that foreign investors remain underweight on India, but there are early signs of interest returning. Meanwhile, domestic retail participation remains strong, contributing to market resilience. Volatility has remained contained even during recent corrections, a sign of underlying strength.

Morgan Stanley prefers domestic cyclicals over defensives and export-oriented sectors. It is overweight on financials, consumer discretionary, and industrials, while underweight on energy, materials, utilities, and healthcare. The firm calls it a "stock picker's market", noting that correlations between stocks have declined.

The brokerage assigns a 50 percent probability to its base-case Sensex target of 89,000, assuming benign oil prices, stable US growth, and a supportive policy environment. Its bull-case scenario pegs the index at 1,00,000 if global and domestic tailwinds—such as low oil prices, rate cuts, and policy reforms—play out strongly. In contrast, a bear-case scenario sees the Sensex falling to 70,000 amid a global slowdown and higher oil prices.

India's lower beta relative to global markets means it may underperform in a global bull run, but the brokerage believes the domestic setup is strong enough to attract inflows and support continued performance.