Sensex might touch 107,000 by 2026-end, says Morgan Stanley
What's the story
Morgan Stanley has predicted a major rebound for the Indian stock market in 2026. The global investment bank has set a bull-case target of 107,000 for the Sensex index by December 2026. This optimistic scenario assumes low oil prices, favorable global trade shifts, supportive policies, and strong economic growth. In its base-case scenario with a probability of 50%, Morgan Stanley expects the Sensex to reach 95,000 by end-2026, a potential upside of nearly 13% from current levels.
Drivers
Bull-case scenario hinges on favorable macroeconomic conditions
The bull-case scenario, which has a 30% probability, is based on several factors. These include oil prices remaining below $65 per barrel, a reversal in the global tariff positions, sustained reflationary policies, and strong economic momentum. If these conditions are met, Morgan Stanley expects Sensex earnings to grow at an annualized rate of 19% between FY25-28. This growth would provide strong support to equity valuations.
Future outlook
Base-case scenario factors in continued macro stability
In its base-case scenario, Morgan Stanley factors in continued macro stability, fiscal consolidation, and healthy private sector investment. It also considers stable global growth and a supportive liquidity backdrop, including possible easing of domestic monetary policy.
Market risks
Bear-case scenario envisions Sensex dropping to 76,000
The bear-case scenario, which has a 20% probability, sees the Sensex dropping to 76,000. This would happen if global headwinds mount with oil prices surging above $100 per barrel or tighter monetary policy. The report's authors Ridham Desai and Nayant Parekh attribute their optimistic projections to India's anticipated policy pivot. They said after their worst underperformance in three decades, Indian equities are set to regain their mojo in 2026.
Market support
Policy pivot for equity outperformance
Desai added that policy has pivoted, supporting a strong recovery in nominal growth. This should take the earnings growth out of the mid-cycle slowdown that has been experienced over the past 12 months.