Morgan Stanley expects the Sensex to deliver strong gains over the next 12–18 months, assigning a 30% probability that the benchmark index could climb to 1,07,000 points by December 2026—a potential upside of around 27% if bullish conditions prevail.
In its base-case scenario, which the brokerage believes is more likely with a 50% probability, the Sensex is projected to reach 95,000 by the end of 2026, translating to gains of nearly 13%. The outlook comes after Indian equities logged their weakest relative performance in three decades during 2025.
What the Base Case Assumes
The base-case forecast is built on expectations that India’s macro stability will continue to improve. Morgan Stanley highlights:
Ongoing fiscal consolidation
A further pickup in private capital expenditure
A favourable differential between real GDP growth and real interest rates
These factors, it argues, should support valuation resilience and earnings expansion.
What Could Drive the Bull Case
For the Sensex to scale 1,07,000, several supportive conditions would need to align:
Crude oil consistently below $65 per barrel, improving India’s terms of trade
Reflation policies gaining traction and pushing up growth expectations
A cooling-off in global tariff disputes, particularly as trade tensions ease
More robust domestic and global growth environments
Analysts Ridham Desai and Nayant Parekh add that a resolution of India–US tariff issues—expected soon—would provide an additional macro boost.
Comparison With Goldman Sachs
The projection arrives shortly after Goldman Sachs estimated that the Nifty could hit 29,000 by end-2026. Morgan Stanley notes that while emerging markets broadly enjoyed one of their strongest years recently, Indian equities lagged—breaking from their usual outperformance pattern.
Why India Underperformed in 2025
The report attributes India’s muted returns to several factors:
A slowdown in growth beginning late 2024
Stretched valuations relative to peers
The absence of direct AI-driven stock plays
Uncertainty around the delayed US trade pact
India’s historically low beta, which limits gains in global risk-on rallies
Risks Ahead
Morgan Stanley cautioned that the biggest threat to its projections is a global slowdown. Although India’s lower beta could help cushion a broad selloff, a risk-off environment would still cap absolute returns.
Sector Preferences
The brokerage continues to favour domestic-facing cyclical sectors, signalling optimism about India’s internal growth engine. It recommends:
Overweight: Financials, consumer discretionary, industrials
Underweight: Energy, materials, utilities, healthcare
Morgan Stanley believes the market is shifting into a phase where macro themes outweigh stock-specific stories, making index-level positioning more relevant.
Earnings Outlook
According to the strategists, India is roughly halfway through its current earnings upcycle. Key drivers for future profit growth include:
A revival in private capex
Ongoing strengthening of corporate balance sheets
A stable and well-capitalised banking system
Improved terms of trade due to rising participation in global trade and falling oil intensity in GDP
A long-term rise in discretionary consumption
