Correction in Indian stock market over, Sensex to hit 100,000 mark by June 2026: Morgan Stanley

The analysts at the Morgan Stanley have suggested that the correction in the Indian stock market is over. They said the key factors driving India’s underperformance compared to emerging market (EM) peers are reversing.

Morgan Stanley highlighted that in a bull-case scenario (attaching a 30 per cent probability), Morgan Stanley sees the Sensex hitting the 100,000 mark by June 2026.

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Their base-case scenario (50 per cent probability) pegs the Sensex at 89,000 levels, which is up around 6.6 per cent from the current levels, while their bear-case scenario pegs the index at 70,000 mark (down 16 per cent from the current levels) to which they have assigned 20 per cent probability.

It is further believed that the Indian stock market is transitioning into one that will be driven by macros, and stock-picking will likely lose importance.

The report written by Ridham Desai, managing director and chief India equity strategist, Morgan Stanley, coauthored with Nayant Parekh, mentioned that India’s growth cycle is set to accelerate.

This acceleration in growth is backed by the reflation effort of the Reserve Bank of India (RBI) and the government via rate cuts, cash reserve ratio (CRR) cut, bank deregulation and liquidity infusion, front-loading of capex, and a near Rs 1.5 trillion in GST rate cuts, the report said.

Desai and Parekh expect ‘positive’ earnings revisions, rate cuts by the RBI in the coming quarter, privatization of public sector companies, and lower US tariffs on India, which they believe will serve as the key catalysts for an uptick in the Indian economy and markets.

“The thawing of relations with China and China’s anti-involution add to the mix. A likely India-US trade deal should further boost sentiment. Thus, India’s hawkish macro set-up post-Covid is now unwinding. Relative valuations have corrected and likely made a trough in October,” the report said.

The report said the foreign portfolio investor (FPI) positioning remains near lows, but net FPI buying will need growth to recover and/or bull markets elsewhere to fade, plus a rise in corporate issuances. Downside risks arise from slowing global growth and worsening geopolitics.