India’s equity market continues to be the top investment choice among emerging markets, with Morgan Stanley projecting a 14% upside for the BSE Sensex by December 2025 in its base case, setting a target of 93,000. The brokerage’s bull case sees the Sensex reaching 105,000, while the bear case stands at 70,000. Despite global growth uncertainties and near-term challenges, India’s strong fundamentals make it an attractive destination for investors.
The country’s positive outlook is supported by robust earnings growth, macroeconomic stability, and a steady inflow of domestic investments. These factors, along with India’s flexible inflation-targeting policy and improved trade terms, have reduced its sensitivity to global market fluctuations, giving it a premium valuation compared to other emerging markets.
India’s earnings are expected to grow at an annual rate of 18-20% over the next few years, driven by strong private sector investment, a reduction in corporate debt, and a structural increase in consumer spending. This consistent domestic demand for equities helps shield the market from external volatility, further bolstering equity valuations.
Morgan Stanley’s forecast is based on a favorable scenario that includes continued fiscal consolidation, growing private investment, and a positive real growth-to-real interest rate gap. Stable oil prices, the absence of a U.S. recession, and moderate interest rate cuts are also expected to drive Sensex earnings to grow at a compound rate of 17.3% annually through FY27. This projection is 15% higher than the consensus.
As India’s market becomes a stock-picker’s environment in 2025, sector preferences are clear: Morgan Stanley recommends overweighting cyclicals such as financials, consumer discretionary, industrials, and technology, while underweighting other sectors. Small and mid-cap stocks are favored over large caps, reflecting confidence in India’s domestic growth drivers. India is expected to continue leading among emerging markets, making it a compelling investment destination.
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