After a year of choppy trade and fading momentum, Morgan Stanley believes the Sensex is ready for its next leg higher. In its latest India Equity Strategy Playbook: Is the Correction Over?, the brokerage projects the Sensex at 1,00,000 by June 2026 in its most optimistic scenario, arguing that India’s long-term growth story remains firmly in place.
The report suggested that the recent slide in equities looks more like a reset than the start of a deeper fall. “The correction has largely played out,” Morgan Stanley said, noting that the market now offers a better balance between risk and reward.
Morgan Stanley outlines Sensex range by mid-2026
In its base case, which carried a 50% probability, the brokerage expects the Sensex to reach 85,000 by mid-2026, assuming a price-to-earnings multiple of 23.5 times, slightly higher than the 25-year average of 22 times. Meanwhile, the bull case, with a 30% probability, pegs the index at 1,00,000, supported by stronger private investment and fiscal discipline. The bear case, with a 20% chance, sees the Sensex closer to 70,000 if global conditions worsen and oil prices surge past $95 a barrel.
Morgan Stanley on India: Market reset has cooled valuations
According to Morgan Stanley, India’s equity market has already gone through a sharp but healthy correction since September 2024. That pullback, it said, helped ease stretched valuations and brought them closer to long-term averages.
The brokerage added that the hawkish macro environment seen after the pandemic is now reversing, and that valuations likely bottomed out in October. “India’s relative valuations to other emerging markets have corrected meaningfully,” it said. This, in its view, creates room for equities to rebuild strength as earnings begin to recover.
Morgan Stanley on India: Earnings expected to drive the next phase
Morgan Stanley believes that earnings growth will take over as the main driver of returns in the coming years. It expects Sensex earnings to grow 19% annually through FY28, with the FY25 consensus earnings per share (EPS) forecast at 5,948.
Morgan Stanley on India: Growth momentum starting to turn up
The report also said that India appears to be entering a positive growth phase, with activity improving across credit, consumption, and investment. It attributed this shift to government reforms, policy consistency, and better liquidity in the banking system.
A large part of the optimism, it noted, comes from stronger consumer demand and continued policy support. The brokerage pointed out that about Rs 15 lakh crore (INR 15 trillion) worth of GST rate cuts have helped boost mass consumption and improve household balance sheets. “The effects of policy support and liquidity easing are beginning to show,” it said, expecting both rural recovery and urban demand to sustain in the months ahead.
Morgan Stanley on India: Macro signals turning more constructive
To back its optimism, Morgan Stanley cited several indicators that tend to move ahead of the market.
First, the yield curve, which usually leads equities by about two months, has started to steepen, something the brokerage reads as an early sign of recovery. Second, the ratio of market capitalisation to money supply suggests that forward returns should gradually improve over the next few quarters.
It also noted that the relationship between foreign exchange reserves and the Sensex remains positive. Rising reserves, it said, generally coincide with stronger equity performance.
Policy steadiness, liquidity will shape the path ahead
Looking forward, Morgan Stanley said the next leg of the rally will depend on policy stability and continued reforms that can sustain private investment. The brokerage expects foreign portfolio inflows, which have been muted in recent months, to return once global volatility subsides.
“The weakness seen through 2024 was mostly about high valuations and a temporary slowdown,” it said. “With both of those easing, the conditions are falling into place for the market to regain its footing.”
Morgan Stanley on India: Risks remain, but the setup looks better
Morgan Stanley warned that the path to 1,00,000 on Sensex won’t be smooth. A slowdown in the US, prolonged geopolitical tensions or a sharp rise in oil prices could all hurt market sentiment. Still, the brokerage believes that most of these risks are already captured in its forecasts.
“The odds are tilted toward recovery,” it said, while cautioning that investors should expect intermittent drawdowns as the market digests global cues.