Morgan Stanley lowers Sensex target to 82,000

Morgan Stanley has revised down its GDP growth forecast for India for FY26 to 6.1 per cent from an earlier estimate of 6.5 per cent

Morgan Stanley has cut its BSE Sensex target for December 2025 to 82,000, down 12 per cent from the previous estimate of 93,000. Despite global headwinds, Indian equities have shown resilience due to the market’s low beta characteristics.

The global investment advisory firm notes a shift from a macro-driven market to one focused on stock-picking, reducing active sector positions and turning capitalisation-agnostic in portfolio strategy.

Morgan Stanley has also revised down its GDP growth forecast for India for FY26 to 6.1 per cent from an earlier estimate of 6.5 per cent, citing heightened global uncertainty and weakening external demand. The forecast for FY27 has also been reduced to 6.3 per cent. The downgrade is attributed to concerns over tariff-related trade disruptions, slower global growth, and their second-order effects on domestic business sentiment and capital expenditure cycles.

Bottoming out

According to the report, India’s economic growth is expected to bottom out at 5.7 per cent in the quarter ending December 2025, down from 6.2 per cent in December 2024. The ongoing global trade tensions, particularly between the US and China, are expected to continue affecting capital flows and export demand. However, the direct impact of tariffs is limited due to India’s relatively low goods export exposure to the US at 2.1 per cent of GDP.

In response to the slowdown, Morgan Stanley expects the Reserve Bank of India to cut rates by a cumulative 100 basis points, bringing the policy rate to 5.5 per cent by the end of FY26. Inflation is projected to remain benign, averaging 4 per cent in FY26, aided by softening food and energy prices.

Earnings slowdown

Earnings expectations have also been tempered. The brokerage has lowered its FY26 earnings estimate for India by 13 per cent, citing weak global macroeconomic conditions and softening corporate pricing power. Nevertheless, Morgan Stanley maintains that the medium-term earnings cycle remains intact, supported by domestic factors like government spending and monetary easing.

Published on April 15, 2025