Morgan Stanley sees 13% upside for Sensex by December 2026 in base-case scenario

Morgan Stanley expects the BSE Sensex to gain 13 percent by December 2026, supported by strong macro fundamentals, improving corporate earnings, and resilient domestic investor flows, even as global uncertainties and near-term volatility persist.

In its latest outlook, the brokerage said Indian equities remain well-positioned over the medium term despite near-term volatility driven by global uncertainties, geopolitical tensions, and intermittent foreign fund outflows. Morgan Stanley noted that India continues to stand out among emerging markets due to strong economic growth, policy stability, and structural reforms.

Morgan Stanley expects corporate earnings growth to recover gradually, supported by easing input cost pressures, a pickup in government capital expenditure, and improving demand conditions across key sectors such as financials, industrials, infrastructure, and consumer discretionary. Banks and non-bank lenders are likely to remain key beneficiaries of healthy credit growth and stable asset quality, it added.

Morgan Stanley also highlighted the growing role of domestic institutional investors (DIIs) and retail participation in providing a steady support base for Indian equities. Systematic investment plan (SIP) inflows into mutual funds have helped cushion markets during periods of foreign institutional investor (FII) selling, reducing volatility compared to past cycles.

On the macro front, the brokerage said India’s inflation trajectory appears manageable, while fiscal consolidation efforts and a stable policy environment continue to improve investor confidence. A favourable demographic profile and ongoing digitalisation were cited as long-term structural drivers for growth.

However, Morgan Stanley cautioned that risks remain, including global trade tensions, sharp movements in crude oil prices, and tighter-than-expected global financial conditions. Near-term market performance could remain choppy, especially around key global events and earnings announcements.

Overall, the brokerage maintains a constructive view on Indian equities, stating that any market corrections could offer attractive long-term entry opportunities as India’s growth story remains intact through 2026 and beyond.