New Delhi, Nov 5 (UNI) The correction in the Indian stock market is over, suggest analysts at Morgan Stanley, claiming the key factors driving the country’s underperformance compared to emerging market (EM) peers are reversing.
Morgan Stanley highlighted that in a bull-case scenario (attaching a 30 pc probability), the Sensex could hit the 100,000 mark by June 2026.
Their base-case scenario (50 pc probability) pegs the Sensex at 89,000 levels, which is up around 6.6% from the current levels, while their bear-case scenario pegs the index at 70,000 mark (down 16% from the current levels) to which they have assigned 20% probability.
It is further believed that the Indian stock market is transitioning into one that will be driven by macros, and stock-picking will likely lose importance.
The report, co-authored by Morgan Stanley Managing Director Ridham Desai and the firm’s Chief India equity strategist Nayant Parekh, mentioned that India’s growth cycle is set to accelerate.
This acceleration in growth is backed by the reflation effort of the Reserve Bank of India (RBI) and the government via rate cuts, cash reserve ratio (CRR) cut, bank deregulation and liquidity infusion, front loading of capex and a near Rs 1.5 trillion in GST rate cuts, the report said.
Desai and Parekh expect ‘positive’ earnings revisions, rate cuts by the RBI in the coming quarter, privatisation of public sector companies and lower US tariffs on India, which they believe will serve as the key catalysts for an uptick in the Indian economy and markets.
“The thawing of relations with China and China’s anti-involution add to the mix. A likely India-US trade deal should further boost sentiment. Thus, India’s hawkish macro set-up post-COVID is now unwinding. Relative valuations have corrected and likely made a trough in October,” the report said.
The report said the foreign portfolio investor (FPI) positioning remains near lows, but net FPI buying will need growth to recover and/or bull markets elsewhere to fade, plus a rise in corporate issuances. Downside risks arise from slowing global growth and worsening geopolitics.
