Mumbai, May 21 Global investment bank Morgan Stanley has raised its Sensex target to 89,000 by June 2026, signalling an 8 per cent upside from current levels.
This revision reflects the firm's increased confidence in India's long-term growth story, supported by strong economic fundamentals and improved earnings outlook.
Additionally, Morgan Stanley has upgraded its earnings per share (EPS) estimates by nearly 1 per cent, following an upward revision in India's GDP growth forecast.
According to the report, the Sensex is now expected to trade at a trailing price-to-earnings (P/E) multiple of 23.5x -- higher than the 25-year average of 21x.
This premium valuation reflects growing investor confidence in India’s stable policy environment and medium-term growth prospects.
The brokerage firm highlighted several reasons behind India’s resilience and potential.
These include strong macro stability, declining primary deficit, low inflation volatility, and a robust domestic investment cycle.
Annual earnings growth in the range of mid- to high is expected over the next three to five years, driven by increasing private capex, healthier corporate balance sheets, and a surge in discretionary consumption.
The report also noted that the Indian stock market has shown remarkable composure despite recent global events.
Retail investors have continued to invest steadily, reinforcing the belief in India’s structural growth story.
Interestingly, foreign investor positioning is at its weakest level since 2000, but early signs indicate a shift in their outlook toward Indian equities.
The Reserve Bank of India’s dovish stance, stable oil prices, and consistent policy support further strengthen the bullish sentiment.
Morgan Stanley also praised India’s recent geopolitical strategy, suggesting it has enhanced national security and global confidence in the country’s governance.
On the investment strategy front, the report suggests that this is likely to be a stock picker’s market.
The firm prefers domestic cyclical sectors over defensives, with an overweight stance on financials, consumer discretionary, and industrials.
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