Morgan Stanley sees 15 pc upside in Sensex by June 2027, says India outperformance ahead
Mumbai, July 9
Global brokerage Morgan Stanley has turned constructive on Indian equities, arguing that the recent underperformance and valuation de-rating of domestic markets are cyclical and set to reverse as economic growth accelerates.
"We argue India's relative de-rating is cyclical and with growth acceleration in the pipeline, it has potential to reverse," the brokerage said in its latest India Equity Strategy Playbook released on July 6. It added that with "depressed trailing performance and foreign ownership, this could be very positive for equities going forward."
Morgan Stanley expects India to remain a defensive growth market, supported by macro stability, improving investment activity and robust domestic liquidity. The brokerage projects India's investment-to-GDP ratio to rise to 37.5 per cent over the next five years, aided by an undervalued currency, moderate real interest rates and fiscal stability.
The brokerage has set a June 2027 target of 89,000 for the BSE Sensex, implying an upside potential of around 15 per cent from current levels. According to Morgan Stanley, the base-case scenario assumes continued gains in macro stability, higher private investment and a positive gap between real growth and real interest rates.
The report noted that the market's next leg of movement would largely depend on how investors assess the growth differential between India and the rest of the world. "India's growth looks to have bottomed and is now trending higher," it said, while also expecting the upcoming earnings season to deliver an upside surprise on the back of strong high-frequency indicators.
Morgan Stanley believes the backdrop for equities remains compelling, citing "broad-based growth acceleration, robust domestic equity flows, a nascent IPO pipeline, the weakest-ever trailing 12M relative performance, relative valuations at all-time lows and foreign positioning at multi-year lows."
Sectorally, the brokerage prefers domestic cyclicals over defensives and externally oriented sectors, maintaining an overweight stance on financials, consumer discretionary and industrials, while remaining underweight on energy, materials, utilities and healthcare.
— ANI
Reader Comments
Finally some good news for retail investors like me! The underperformance phase was painful for my mutual fund portfolio. Hoping the earnings season delivers as expected, especially for IT and banking stocks. Jai Hind! 🇮🇳
My chai wala friend and I were just discussing this! While the report sounds promising, we need to remember that global uncertainties (US Fed, China slowdown, Middle East tensions) can impact our markets. Plus, our own inflation and job creation numbers need to improve for sustainable growth. Let's be cautiously optimistic, yaar.
As a small investor, I've learned not to trust these big brokers blindly. They said 70K target last year and we barely crossed 75K. But yes, our economy is fundamentally strong - infrastructure push, digital payments revolution, and young population are real positives. Just don't overshoot your risk appetite. 📈
One thing I appreciate about Morgan Stanley's analysis is their focus on macro stability. Our government has done well keeping fiscal deficits in check while investing in infra. The fact that they prefer domestic cyclicals (financials, consumer discretionary) over IT/pharma says a lot about where our strength lies. Good days ahead for Indian markets. 👍
Let's be real here - these reports are designed to make FIIs (Foreign Institutional Investors) feel good about coming back to India. But for the average middle-class family, Sensex at 89,000 means nothing if vegetable prices are still ₹60/kg and petrol costs ₹100/l
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