Morgan Stanley, global investment advisor, expects the benchmark BSE Sensex to hit 89,000 by June 2026, indicating a growth of around 8 per cent from current level.
According to Morgan Stanley, key India-specific catalysts include more dovish actions from the RBI, stimulus through GST rate cuts, a favourable trade deal with the US and incoming growth data, both domestic and global. “A global recession or near recession would challenge our call. Long-term concerns include capacity constraints in the judiciary, AI’s effects on the tech industry, low productivity in the farm sector and State-level fiscal challenges,” it added.
In a bull case scenario (30 per cent probability), BSE Sensex can hit 100,000, it predicted. “In addition to the above, oil prices are persistently below the $65s, resulting in better terms of trade and prompting more rate cuts from the RBI. The global trade war is curtailed by complete reversals in positions on tariffs, leading to improved growth prospects. Government reforms surprise to the upside with a slew of GST rate cuts and some progress on farm laws. Earnings growth compounds at 19 per cent annually over FY2025-28.”
Bear case scenario
However, in a bear case scenario, for which it sees a 20 per cent chance, the Sensex can dip to 70,000, Morgan Stanley warned. “Oil prices surge past $100/barrel, the RBI ends up tightening to protect macro stability, global growth slows meaningfully, and notably the US slips into recession. Sensex earnings compound at 15 per cent annually over FY2025-28 with perceptibly lower growth in FY2026 and equity multiples de-rate to reflect poor macro conditions,” are likely to act as a dampener, the global brokerage said.
It prefers domestic cyclicals over defensives and external-facing sectors; overweight Financials, Consumer Discretionary and Industrials; underweight on Energy, Materials, Utilities and Healthcare. “This is likely to be a stock pickers’ market, in contrast to one driven by top-down or macro factors since the Covid pandemic. Thus, our average active sector position is just 80 bps,” it further said.