Morgan Stanley believes Indian equities are heading into one of their strongest phases in years, forecasting the Sensex to reach 1,07,000 by December 2026 in a bullish scenario and 95,000 in its base case, suggesting about 13% potential gains from current levels. After a period of sharp underperformance in 2025, the brokerage expects a broad revival supported by macro improvements, policy easing and a stronger earnings cycle. It noted that India is likely to “regain its mojo” in 2026 as the market shifts from stock-specific moves to a more macro-driven setup. With foreign investor exposure at historic lows, valuations back to normal and domestic inflows remaining robust, the foundation for a multi-year uptrend appears solid.
Morgan Stanley sees near-term strength coming from an improving earnings cycle, reflation-oriented policies and better terms of trade. Sensex earnings are projected to grow 17–19% annually through FY28, helped by stronger private investment, healthier banks and steady nominal GDP growth. Rising domestic equity ownership, supported by household financialisation and pension reforms, is reducing India’s reliance on foreign capital.
Policy actions such as RBI rate cuts, liquidity support, tax adjustments and higher public-sector capex are easing post-pandemic tightness, paving the way for more predictable growth. The brokerage prefers sectors linked to domestic demand—consumer discretionary, financials and industrials—while remaining cautious on energy, utilities, materials and healthcare. Its model portfolio features names like Maruti, Titan, Reliance, ICICI Bank, Bajaj Finance, L&T and UltraTech. However, it warned that global risks—such as a U.S. slowdown, expensive oil or tighter financial conditions—could restrict gains, with a bear-case Sensex target of 76,000 by end-2026.
