New Delhi: The Indian stock market has regained strong momentum, driven by a series of major international trade deals that have significantly improved investor confidence. According to a latest report by global financial services giant Morgan Stanley, Indian equities are now positioned for a major re-rating, supported by improving macroeconomic conditions and strong policy measures.
The report highlights that India’s post-pandemic economic environment, which remained relatively tight for several years, is now showing signs of easing. This shift, combined with government reforms and supportive monetary policy, could push the BSE Sensex sharply higher by the end of 2026.
Sensex Target: Bull Case at 1,07,000
Morgan Stanley’s equity strategists Ridham Desai and Nayantara Parekh have projected three possible scenarios for the Sensex by December 2026:
- Bull Case: Sensex may surge to 1,07,000
- Base Case: Sensex could reach 95,000
- Bear Case: Sensex may fall to 76,000
The outlook comes at a time when India has reportedly finalized significant trade agreements with both the European Union (EU) and the United States, strengthening the country’s economic growth prospects.
Key Drivers Behind the Rally
Morgan Stanley noted that India’s growth cycle could accelerate due to coordinated efforts by the Reserve Bank of India (RBI) and the government. These efforts include:
- Interest rate cuts
- Bank deregulation
- Higher liquidity support
- Continued capital expenditure
- Tax reductions
- A growth-oriented budget
The report further stated that inflation is likely to remain under control, creating a favorable environment for sustained economic expansion.
Analysts See Earnings Upside Ahead
The strategists emphasized that corporate earnings in India could witness a major positive shift in the coming months. They also pointed to improving trade relations and a potential easing in India-China ties as additional supportive factors.
Rare Combination Supporting Indian Equities
Morgan Stanley identified a “rare combination” of factors currently working in favor of Indian markets. These include:
- Attractive relative valuations
- Weak foreign investor positioning
- Strong policy stimulus
- Growth upcycle potential
- Undervalued rupee
- Possibility of a fresh corporate buyback cycle
The report stated that Indian equities have delivered one of their weakest performances in the last 12 months historically, which has brought valuations closer to lower levels, making the market attractive again.
Four Major Catalysts for Strong Growth
Morgan Stanley outlined four key catalysts that could drive the market higher:
- Growth Signals: Corporate earnings are expected to outperform consensus estimates.
- RBI Policy Support: Liquidity and credit growth are likely to remain supportive.
- Policy Reforms: Measures including privatization and reforms are gaining pace.
- Foreign Buying Revival: After months of selling, FPI positioning is at low levels, and renewed buying could return once growth improves.
Market Performance
On February 6, the Sensex ended higher by 266.5 points (0.32%), closing at 83,580.40, while the Nifty 50 gained 51 points (0.20%), ending at 25,693.70.
Outlook
With trade agreements, supportive policy measures, and expectations of stronger earnings growth, Morgan Stanley believes Indian markets may be entering a fresh rally phase. If conditions remain favorable, the Sensex could potentially scale new highs and move closer to the ambitious 1,07,000 mark by December 2026.
Discover more from SD NEWS agency
Subscribe to get the latest posts sent to your email.