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Markets & Economy

Global brokerage firm Morgan Stanley stated on Thursday that Indian markets are poised for a strong rally, with the Sensex likely to touch the 95,000 level by December 2026.

In its latest India Equity Strategy Playbook report, the brokerage noted that the current combination of depressed valuations, improving earnings momentum and cautious investor positioning reflects conditions typically seen near the end of market downturns.

• India's trailing market performance over the past year is close to historic lows, while relative valuations have declined sharply.
• Robust domestic demand, policy stability and a recovery in capital expenditure continue to underpin fundamentals.
• A major catalyst is the revival in the earnings cycle — high-frequency indicators point to strengthening trends across consumption, investment and services.
• India's share of global corporate profits now exceeds its index weight by the widest margin on record.
• The brokerage remains ahead of consensus earnings estimates and expects positive earnings revisions going forward.

Morgan Stanley pointed out that the Sensex is currently trading at its cheapest level when measured against gold — a long-term indicator often associated with major market turning points. India's relative price-to-book multiples are near historical lows, even as macroeconomic stability improves.

Foreign investor positioning has weakened in recent months, but this could further support an upside surprise if earnings momentum continues to improve.

While risks from geopolitical tensions and global growth remain, Morgan Stanley believes the broader outlook points towards a sustained market recovery.