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Global financial giant Morgan Stanley has issued a highly optimistic assessment of the Indian equity market, proclaiming that the period of correction is over and setting a remarkable target for the benchmark Sensex. Analysts at the firm believe the Sensex has the potential to touch the 100,000 mark by June 2026 in their bull-case scenario, to which they assign a significant 30% probability. This projection is underpinned by a conviction that the macroeconomic factors that caused India to underperform its Emerging Market (EM) peers are now definitively unwinding. Morgan Stanley’s confidence rests on a multi-pronged recovery forecast. The firm posits that India’s growth cycle is set to accelerate, driven by proactive policy intervention. This includes an expected “reflation effort” by the Reserve Bank of India (RBI), which could translate into interest rate cuts, easing banking regulations, and providing liquidity infusion. Furthermore, the government’s commitment to front-loading capital expenditure and potential GST rate cuts (estimated at around Rs 1.5 trillion, heavily focused on mass consumption goods) is expected to inject substantial stimulus into the economy. The brokerage identifies several external factors contributing to its bullish view. The thawing of relations with China and the potential finalisation of a favourable India-US trade deal are cited as key catalysts that will boost both sentiment and actual trade volumes. Analysts argue that the hawkish macro environment India faced post-pandemic is now reversing. Specifically, the country’s reduced oil dependency on GDP, rising service exports, and disciplined fiscal consolidation imply a structurally lower need for high real interest rates, supporting higher valuation multiples. While the base case (assigned a 50% probability) for the Sensex by mid-2026 is set at 89,000, the 100,000 bull case hinges on favourable conditions such as oil prices remaining below the $65 per barrel mark, significant ease in global trade tensions, and corporate earnings compounding at an aggressive annual rate. Morgan Stanley’s report notes that Foreign Portfolio Investor (FPI) positioning in India remains near historic lows, suggesting significant scope for capital inflows as market stability and growth recover. The firm has shifted its portfolio strategy to favour domestic cyclical sectors—including financials, consumer discretionary, and industrials—over export-heavy and defensive sectors, signalling a fundamental belief in India’s internal growth engine.
