Indian equities are set to rebound as key factors behind their recent underperformance begin to reverse, Morgan Stanley said in a report. The firm expects front-loaded capital expenditure and GST rate cuts to drive growth in the coming quarters.
Morgan Stanley sees a 50 per cent chance that the BSE Sensex will reach 89,000 by June 2026, implying a 6 per cent upside. It said India’s growth cycle will strengthen, supported by RBI’s rate cuts and a lower cash reserve ratio (CRR).
The firm cited deregulation, liquidity infusion, and a possible India-US trade deal as major catalysts. It added that easing ties with China and GST cuts worth ₹1.5 trillion could lift investor sentiment. Analysts believe falling oil intensity in GDP and stronger exports will help cut real rates and steady inflation.
Morgan Stanley prefers domestic cyclicals such as financials, consumer discretionary, and industrials over defensives. The firm expects stronger foreign inflows and monetary easing to further boost India’s equity outlook in the near term.
