Sensex will reach 89,000 by June 2026, implying 12% upside: Morgan Stanley

Global investment firm Morgan Stanley expects India’s benchmark BSE Sensex to climb to 89,000 by June 2026, about 12% above current levels, driven by fiscal consolidation, stronger private investment and structurally lower real interest rates.The Sensex and Nifty have delivered largely flat returns so far this year. Bloomberg data shows that the MSCI India Index is up just 1.3% in dollar terms, sharply trailing the 19.5% rally in the MSCI Emerging Markets Index—its weakest relative performance since 1995.

Morgan Stanley said investors may be underestimating India’s growth cycle, with earnings momentum poised to strengthen and support an equity re-rating. It cited favourable demographics, rising exports, fiscal discipline and a household shift towards equities as structural drivers of resilience compared to peers.

Scenarios for SensexBase case (50% probability):

Sensex at 89,000, or about 23.5 times earnings, slightly above its long-term average, assuming macroeconomic stability through fiscal discipline and inflation management.

Bull case (30% probability): Sensex at 1,00,000 if oil prices stay low, GST reforms advance and global trade frictions ease.

Bear case (20% probability): Sensex at 70,000 if oil climbs above $100 a barrel, the US slips into a recession and the Reserve Bank of India tightens policy.

“India’s low beta implies outperformance in a global bear market but underperformance in a bull market,” the note said, adding that falling inflation volatility and household equity flows are supporting valuations.

The bank expects Sensex earnings to grow 16.8% annually through FY2028. It recommends overweight positions in financials, consumer discretionary and industrials, while staying underweight on energy, materials, utilities and healthcare.

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