Sensex Could Hit 1 Lakh by 2026, Says Morgan Stanley as Indian Market Re‑rates

Global investment bank Morgan Stanley has raised optimism on India's stock market, projecting the BSE Sensex to reach 89,000 by June 2026, which represents an approximate 10% upside from current levels. In their bull-case scenario, with a 30% probability, the index could even touch 1 lakh within the same timeframe.

Re-Rating Powered by Strong Fundamentals

Morgan Stanley strategists Ridham Desai and Nayant Parekh say India’s market is primed for a structural re-rating amid ongoing macroeconomic stability and favourable demographics. Key drivers include rising global output share, a powerful domestic consumer market, declining oil intensity in GDP, controlled inflation, and healthier household balance sheets. These factors suggest a durable appeal for Indian equities.

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Eight Supportive Growth Catalysts

Desai outlines eight fundamentals underpinning the Sensex rally forecast:

• India’s rising share in global output
• Increasing influence of domestic consumer demand
• Lower oil dependency in GDP composition
• Stabilised inflation dynamics
• Improved household finances and equity allocation
• Signs of corporate earnings recovery
• Ease in trade-related and tariff pressures
• Positive trends in foreign portfolio investment (FPI) inflows

Scenarios: Base, Bull, Bear

In Morgan Stanley’s base case, Sensex reaches 89,000, suggesting a trailing P/E of about 23.5x—above the long-term average. Earnings are expected to grow at 16.8% annually through FY28, supported by stable oil prices and favourable real-growth real-rate differentials. In the bear case (20% probability), the index could fall to 70,000 if oil prices rise sharply, global recession risks increase, or macro stability worsens. 

Strategic Sector Preferences

Morgan Stanley favours domestic cyclicals over export-heavy or defensive sectors. It remains overweight on financials, consumer discretionary, and industrials, while underweight on energy, materials, utilities, and healthcare. The analysts describe the environment as a stock-pickers’ market, favouring bottom-up selection over macro-driven bets.

Conclusion

Morgan Stanley’s bullish outlook reflects confidence in underlying economic strengths, structural reforms, and investor appetite for Indian equities. While near-term volatility remains possible, the firm’s benchmark target of 89,000 Sensex by mid‑2026 and a may potential push toward 100,000 underscore a broader theme: India’s equity markets appear due for a sustainable re-rating. Investors should watch policy developments, macro stability, earnings performance, and FPI flows in the coming months.