Morgan Stanley sees Sensex at 1,07,000 by December in bullish scenario

Global brokerage Morgan Stanley has projected a bullish outlook for Indian equities, forecasting the BSE Sensex to reach 1,07,000 by December 2026 in its best-case scenario, underpinned by easing macro pressures, improving valuations and policy support.

Global investment bank Morgan Stanley has issued a notably optimistic outlook for Indian equity markets, saying Dalal Street is poised for a broad re-rating after an extended period of underperformance. In its latest strategy note, the Wall Street firm projected the BSE Sensex could surge to 1,07,000 points by December 2026 in a bullish scenario, a base-case target of 95,000, and a bear-case level of 76,000 if key risks materialise.

At present, the Sensex — India’s premier benchmark index — is trading around the 83,580 mark, having recently endured a sharp downturn of over 2% on concerns related to record government borrowing and a hike in taxes on futures and options trading.

Drivers Behind the Bullish Call

Morgan Stanley’s strategists — including Ridham Desai and Nayant Parekh — explained that India’s macroeconomic environment appears to be shifting from a prolonged “hawkish” stance towards a more growth-oriented framework, following sustained rate cuts totalling 125 basis points since last February. They highlighted a combination of monetary and fiscal reflation policies, bank deregulation efforts, increased banking liquidity, continued capital expenditure, and pro-growth budgetary measures as key catalysts for re-rating the market.

In addition, easing trade tensions — especially with China — and a resumption of global commerce are seen as positive forces boosting investor sentiment and contributing to what Morgan Stanley describes as a rare mix of favourable market dynamics: inexpensive relative valuations, historically weak trailing performance, strong policy support, an undervalued currency, and the potential launch of a new corporate share buyback cycle.

The firm noted that 2025 marked one of the weakest trailing 12-month performances in Indian equities, with foreign investors withdrawing significant capital — estimated at about $19 billion in 2025 and another $4 billion so far this year — creating opportunities for valuation recovery.

Bull, Base and Bear Scenarios

In Morgan Stanley’s bullish scenario, the Sensex reaching 1,07,000 by December 2026 assumes supportive global conditions, steady oil prices, sustained earnings growth, and further policy reforms that enhance corporate profitability and investor confidence.

In the base case, which the firm regards as more likely, the index could move up to 95,000, reflecting an approximately 13% potential upside from current levels, underpinned by sound macro fundamentals and continued private investment.

However, in a bear scenario — where oil prices spike above certain thresholds, monetary tightening is required, or global growth falters — the benchmark could descend toward 76,000 by year-end 2026, illustrating the range of possible outcomes in an unpredictable global landscape.

Policy and Growth Support

Morgan Stanley also highlighted India’s economic resilience, forecast to close the fiscal year around 7.4% growth despite several market headwinds — underscoring the underlying strength that could support corporate earnings and market performance. It pointed to the Reserve Bank of India’s growth-supportive liquidity stance, potential reform initiatives including privatization, and structural policy changes designed to catalyse long-term investments.

Market Implications

This elevated forecast contrasts with Dalal Street’s recent performance but aligns with a broader industry narrative forecasting a re-rating phase for Indian equities — supported by improving earnings, policy clarity, and a stable macro backdrop. If realized, Morgan Stanley’s projections would mark a significant recovery from one of the weakest phases in recent market history and energise