Even with the lower target, this implies a 9% potential upside from the current levels by the end of December 2025.
“India’s low beta is helping to significantly outperform amid the global selloff, even while the index could reach multi-month lows. Key India-specific catalyst includes continuing dovish actions from the RBI, stimulus through GST rate cuts, a trade deal with the US, and incoming growth data. Our new December 2025 Sensex target is 12% lower, at 82,000, 9% above the current level,” Morgan Stanley India’s Ridham Desai said in a note.
If the Sensex hits 82,000, the price-to-earnings (P/E) ratio would be 23 times trailing earnings, which is higher than the long-term (25-year) average of 21 times.
According to Morgan Stanley, the premium over the historical average reflects greater confidence in the medium-term growth cycle in India, India’s lower beta, a higher terminal growth rate, and a predictable policy environment.
Last year in December, Morgan Stanley had projected a target of 93,000 for Sensex by December this year as its base case. The bullish scenario was for Sensex to test 1,05,000, while a bearish outlook places it at 70,000, the analysis had said.
The brokerage expects a slower recovery in FY27 at 6.3%, compared to its earlier outlook for steady growth of 6.5%. It has reduced its GDP growth estimate for the financial year 2026 by 40 basis points to 6.1%.
Inflation is expected to remain benign, with the brokerage forecasting an average of 4% in fiscal 2026.
The risks to India’s growth outlook are mostly on the downside, mainly driven by an even deeper slowdown in global growth, the brokerage wrote in its note.
Morgan Stanley has trimmed its FY26 earnings estimate by 13%, citing global macroeconomic issues as the key reason.
The US economy is in a “big pause” due to uncertainties surrounding Trump’s tariff and other policies, Atlanta Federal Reserve Bank President, Raphael Bostic said, suggesting the central bank should retain its current position until there is more clarity.
Traders are currently expecting 83 basis points of rate cuts from the Fed in 2025.
Trump’s tariff moves have caused turmoil on financial markets. The US stock market ended a volatile week higher, but the safe haven of gold hit a record high during the session and benchmark US 10-year government bond yields posted their biggest weekly increase since 2001 alongside a slump in the dollar, signaling a lack of confidence in the US.
