Sensex could hit 89,000 by June 2027, says Morgan Stanley
What's the story
Morgan Stanley, a leading Wall Street firm, has projected that the Indian economy is entering a multi-quarter growth phase. The firm anticipates a significant improvement in equity market performance over the coming months. In its base case scenario with a 50% probability, Morgan Stanley predicts Sensex could reach as high as 89,000 by June 2027. This prediction is based on factors such as macroeconomic stability and increased private sector investment.
Economic assumptions
Projections based on macroeconomic factors
The brokerage firm's prediction also takes into account strong domestic growth, stable global growth, and lower oil prices.
It expects a favorable monetary policy environment and no major surge in issuances, with retail demand continuing to outpace supply.
The firm projects Sensex earnings will grow at an annual rate of 16% until FY2029.
Growth catalysts
Improvements in investments and monetary policy
Morgan Stanley has identified the market's perception of the growth gap between India and the rest of the world as a key driver.
"High frequency indicators including earnings look really solid, underscoring an up-cycle in progress due to improving investments," said the brokerage.
It added that they expect investment-to-GDP ratio to rise to 37.5% over five years, supported by monetary policy, undervalued currency, and recovery in consumer sentiment.
Market outlook
India seen as defensive growth market
Morgan Stanley sees India as a "defensive growth market," with a major earnings cycle expected to unfold in the coming quarters.
The firm expects this cycle to push corporate profits as a share of GDP to a new high.
For equity investors, Morgan Stanley sees broad-based growth acceleration, strong domestic flows, an emerging IPO pipeline and relative valuations just off their all-time lows.