With US President Donald Trump proposing a 25% tariff on Indian goods, significantly higher than those imposed on neighbouring countries like Pakistan and Bangladesh, market participants have been left disappointed. This sentiment has also slightly reflected in the stock market’s performance.
Amidst this backdrop, global brokerage firm Morgan Stanley has shared a bold outlook on Indian markets. It expects a re-rating in the near future and believes that the Sensex could soon touch the 1 lakh mark.
But is this really possible? What are the key triggers supporting this view? Let’s break it down and understand what it means for investors.
What’s Happening?
Global brokerage Morgan Stanley has issued a positive outlook for Indian stock markets. The firm believes the Sensex could reach 1 lakh by July 2026 in the best-case scenario, supported by multiple factors. It also sees India gaining a larger share of global output in the coming decades.
Morgan Stanley projects that the Sensex could reach 1,00,000 in a bull-case scenario, assigning it a 30% probability.
Base Case: In its base case, with a 50% probability, Morgan Stanley expects the Sensex to hit 89,000 by July 2026. This is based on continued economic reforms, strong domestic growth, no US recession, stable oil prices, and improved trade ties with the US.
Bull Case: In the bull case, with a 30% probability, the Sensex could reach 1 lakh by July 2026. This could happen if oil prices stay below $65 per barrel, trade barriers are reduced, the RBI cuts interest rates, and the government introduces further reforms such as GST rate cuts and progress on farm laws.
Bear Case: In the bear case, with a 20% probability, the Sensex may fall to 70,000 by July 2026. This scenario could unfold if oil prices rise above $100 per barrel, the RBI tightens policy, global growth slows, and the US enters a recession.
Reasons Behind the Sensex’s 89,000 Target
Here are the reasons Morgan Stanley’s Ridham Desai believes the Sensex could reach 89,000:
Stable Inflation: Improved policies are lowering inflation volatility, supporting steady growth and stronger market valuations.
Rising Global Role: India’s share in global output is expected to rise due to strong demographics, policy stability, better infrastructure, and a surge in entrepreneurship.
FPI Rebound Potential: Despite weak current FPI positions, India’s economic stability could attract foreign flows during global downturns.
Lower Oil Dependence: Reduced oil intensity in GDP and rising exports may contribute to lower real interest rates.
Consumer Market Strength: India is poised to become a top consumer market, with gains expected in energy transition, credit growth, and manufacturing.
Shift to Equities: Lower inflation and higher disposable income could encourage households to invest more in equities, boosting market flows.
Earnings Recovery: Corporate earnings are improving after a weak phase, aided by a dovish RBI and potential tax reforms.
Trade and Investment Triggers: Progress on a trade deal between India and the US, higher capex, and improved economic data could enhance market sentiment.
Morgan Stanley’s Previous Predictions and Their Outcomes
In December 2022, Morgan Stanley predicted that the Sensex could touch 80,000 by December 2023 in its bull-case scenario, with a 30% probability. At the time, the Sensex was around 60,800. In the base case, with a 50% probability, the target was 68,500, based on factors like sustained domestic growth, limited impact of the Russia-Ukraine war, and no major recession in the US. In the bear case, with a 20% probability, the Sensex was expected to fall to 52,000.
The results were mixed. The Sensex reached neither 80,000 nor 52,000 within the stipulated period. However, it eventually crossed the 80,000 mark on July 3, 2024. The base case target of 68,500 was achieved in December before the prediction period ended.
What Does This Mean for Investors?
Markets are meant to rise over time, and short-term corrections are a normal part of that journey. The Sensex rallied approximately 18% from 71,425 on April 7, 2025, to a high of 84,089 on June 30. It then witnessed a healthy correction of around 4.3%, dipping to 80,496 by August 1. As of August 5, it is hovering around similar levels.
For investors, this highlights the importance of staying focused on quality stocks. Morgan Stanley believes the current phase favours stock pickers over those betting on broad market trends. The firm prefers domestic-facing sectors and remains positive on financials, consumer discretionary, and industrials. However, it is cautious about sectors like energy, materials, utilities, and healthcare.
What’s Next?
Morgan Stanley consistently backs its forecasts with detailed reasoning and conditional factors. If these conditions are met within the projected time frame, the Sensex could very well reach its target.
In December 2024, the firm projected the Sensex could touch 1,05,000 by December 2025 with a 30% probability, and 93,000 in the base case. This reflects their confidence in India’s growth story. However, this time the prediction horizon has been extended to 2026, from the earlier estimate of December 2025.
Investors should keep an eye on key factors like India-US trade relations, crude oil prices, GDP growth, inflation data, RBI’s interest rate decisions, and other macro indicators. If these align well, the Sensex could scale new highs, even if the timeline shifts slightly. That said, some short-term corrections along the way should still be expected.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
