Sensex could hit 105,000 in 1 yr: Morgan Stanley's bullish outlook on India

Morgan Stanley's outlook assumes that India will maintain macroeconomic stability, aiding investor confidence

India’s stock market may emerge as a standout performer among emerging markets in 2025, Morgan Stanley said on Friday, according to a report by The Economic Times. The global brokerage firm has forecasted that the BSE Sensex could soar to 105,000 in a bullish scenario, supported by strong earnings growth, macroeconomic stability, and robust domestic capital inflows.

 

Sensex's 30 per cent profitability potential

Morgan Stanley predicts a 30 per cent probability of the Sensex reaching the 105,000 mark by December 2025. Its base case scenario sets a target of 93,000, representing a 14 per cent upside from current levels.

 

 

The projection reflects confidence in India’s economic trajectory. Quoting Ridham Desai of Morgan Stanley, the report stated that the base case scenario assumes that India will maintain fiscal discipline, encourage private investments, and achieve a positive gap between real growth and interest rates. This would allow the Sensex to trade at a trailing price-to-earnings (P/E) ratio of 23x, exceeding its 25-year average of 20x.

 

Base case scenario

Under the base case, the most likely scenario, the brokerage estimates Sensex earnings will compound at 17 per cent annually until financial year 2026-27 (FY27). Factors such as fiscal consolidation, steady retail investment, and manageable equity supply are expected to support this growth.

 

Morgan Stanley’s outlook also assumes that India will maintain macroeconomic stability, aiding investor confidence.

 

Sensex target: 93,000 (14 per cent growth from current levels).

Earnings growth: Expected to compound at 17 per cent annually until FY27.

 

Bull case scenario

In the optimistic bull case, the Sensex could touch 105,000 by December 2025. This outcome hinges on several favourable conditions, including:

 

1. Oil prices: Remaining below $70 per barrel, reducing inflationary pressures.

2. Rate cuts: Lower inflation could prompt the Reserve Bank of India (RBI) to reduce interest rates further.

3. Reforms and foreign flows: Surprises in government reforms, such as GST rate cuts and progress on farm laws, coupled with increased foreign investments.

4. Global trends: A stable US growth cycle and resolution of the Ukraine-Russia conflict could positively impact India’s trade and economic environment.

 

The firm projects earnings growth at 20 per cent annually for FY24-27 under this scenario.

 

Sensex target: 105,000 (30 per cent probability of achieving).

Earnings growth: 20 per cent annually between FY24-27.

 

Bear case scenario

However, Morgan Stanley cautions that the Sensex could drop to 70,000 in a worst-case scenario, representing a 20 per cent decline. This outcome is likely if:

Global oil prices rise above $110 per barrel.

The RBI tightens monetary policy to protect macroeconomic stability.

The US economy slips into a recession, slowing global growth.

 

In this scenario, Sensex earnings are expected to compound at 15 per cent annually over FY24-26, with equity valuations reflecting weaker macroeconomic conditions.

 

Sensex target: 70,000 (20 per cent downside).

Earnings growth: 15 per cent annually between FY24-26.

 

Morgan Stanley bullish on finance and tech

 

Morgan Stanley remains bullish on sectors such as financials, technology, consumer discretionary, and industrials, while being cautious about others. The brokerage predicts that small and mid-cap stocks, following recent corrections, may outperform large-cap stocks in the near future.

 

The firm’s focus list includes prominent companies such as Maruti Suzuki, Reliance Industries, ICICI Bank, SBI Life Insurance, and Infosys, highlighting key opportunities for investors in the current market environment.