Despite stock market crash, Morgan Stanley expects Sensex to climb 1,00,000 peak in 2025

India is expected to be among the best performing emerging markets (EMs) in 2025 and the benchmark BSE Sensex is projected to touch 93,000 levels by the end of 2025, according to global brokerage house Morgan Stanley.

“With strong earnings, macro stability and domestic flows, it is hard to argue against India’s investment case,” said the brokerage firm.

Its base case BSE Sensex target of 93,000 implies upside potential of 18% to December 2025. This level suggests that the 30-share index would trade at a trailing P/E multiple of 23x, ahead of the 25-year average of 20x.

“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,” Morgan Stanley said.

Sensex at 93,000

It sees 50% probability of its base case scenario of Sensex hitting 93,000 in December 2025. This level assumes continuation in India’s gains in macro stability via fiscal consolidation, increased private investment and a positive gap between real growth and real rates. Robust domestic growth, no recession in the US and benign oil prices are also part of our assumptions.

“We use a modest reduction in interest rates and a positive liquidity environment as the base case for monetary policy. We do not anticipate a bunching up of issuances and the retail bid keeps its nose ahead of the supply. Sensex earnings compound at 17% annually through F2027. In our base case, we are 15% ahead of consensus to F2027,” Morgan Stanley said.

The fundamentals, it said, are underpinned by strong macro stability as a result of improving terms of trade and flexible inflation targeting; forecast earnings growth of about 18-20% annually over the next 4 to 5 years, led by an emerging private capex cycle, re-leveraging of corporate balance sheets and unfolding of a structural rise in discretionary consumption; and a reliable source of domestic risk capital.

These factors have reduced India’s beta to EM to ~0.4 explaining the rich headline multiple, said the brokerage firm.

Sensex at 105,000

In its bull case scenario, Morgan Stanley has a Sensex target of 105,000. It sees 30% probability for this.

Key drivers include persistently low oil prices (below $70), reducing domestic inflation and enabling RBI rate cuts. Improved energy balance and a stronger growth outlook for India further bolster this case. Continued US economic growth supports global equities, driving robust foreign inflows into India.

Additionally, a resolution to the Ukraine-Russia conflict could repatriate INR balances from Russia. Government reforms, including GST rate cuts and progress on farm laws, surprise positively. Earnings growth is projected to compound at 20% annually over FY2024-27.

Meanwhile, Morgan Stanley’s bear case scenario for Sensex targets 70,000 by December 2025, assigning a 20% probability.

Portfolio Strategy

Morgan Stanley believes it is likely to be a stock pickers’ market in contrast to one driven by top down or macro factors since the Covid pandemic. It remains Overweight on Financials, Consumer Discretionary, Industrials and Technology sectors and Underweight on other sectors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.