Revised Forecast Reflects Near-Term Volatility, But Medium-Term India Story Remains Intact
Morgan Stanley has revised its December 2025 target for the Sensex to 82,000, down from its earlier base case of 93,000, citing short-term global headwinds and increasing volatility due to the evolving tariff situation between the US and China. While the revision marks a 12% cut from earlier estimates, the new target still represents a 9% upside from current market levels, indicating the brokerage’s continued constructive stance on Indian equities.
Ridham Desai, Chief Strategist at Morgan Stanley India, reiterated that India remains a structural outperformer, highlighting a number of macro and market-specific buffers that are helping the country weather global selloffs more effectively. However, he also acknowledged that multi-month lows may still be tested in the near term, especially if volatility remains elevated across developed markets.
Highlights:
Sensex year-end target revised to 82,000 from 93,000 earlier.
Still implies 9% upside from current levels (~75,500–76,000).
Reduction attributed to global tariff concerns and correction risk.
India remains a low-beta outperformer with strong macro stability.
Low Beta Profile, RBI Dovishness, and Structural Reforms Anchor Indian Equities
Morgan Stanley’s revised outlook still supports India’s resilience, citing key catalysts such as RBI’s dovish policy stance, expected GST rate cuts, and a potential trade agreement with the US. Desai noted that India’s relatively low correlation with global market swings — its “low beta” status — has allowed it to outperform other emerging markets even during broad-based selloffs.
The firm believes that once the current correction subsides, India will likely resume its outperformance, aided by strong domestic fundamentals, a favorable external environment marked by improving terms of trade, and reduced inflation volatility. The falling primary fiscal deficit is also seen as a key macro anchor.
Highlights:
RBI’s accommodative stance and likely GST tweaks are major tailwinds.
India’s lower beta profile aids stability amid global turbulence.
Improving trade balance and reduced inflation volatility support macro outlook.
Indian equities expected to resume relative outperformance post-correction.
Base, Bull, and Bear Scenarios Remain in Play Amid Uncertainty
While the updated base case target stands at 82,000, Morgan Stanley’s December 2024 projection had laid out a broader range of outcomes:
Bullish case: Sensex could rise to 1,05,000 by end-2025, assuming strong earnings growth, smooth global macro backdrop, and policy tailwinds.
Bearish case: A fall to 70,000 if the global recession deepens, tariffs increase sharply, or inflation shocks return.
Base case (revised): 82,000, considering ongoing market correction and policy uncertainty, but balanced by India-specific strengths.
This recalibration suggests Morgan Stanley’s outlook remains positive, but more tempered in light of recent geopolitical and economic developments.
Highlights:
Bullish scenario: Sensex at 1,05,000.
Bearish scenario: Sensex at 70,000.
Base case revised to 82,000 from 93,000 in December 2024 outlook.
Morgan Stanley advises investors to brace for potential market lows before upside resumes.
Tariff Uncertainty and Trade Talks with the US Shape the Macro Landscape
India is increasingly seen as a safe haven amid global turbulence, largely due to its resilient domestic demand and emerging role in global manufacturing. As tariff uncertainties rattle equity markets globally, India’s perceived insulation from the direct fallout has attracted capital inflows and investor attention.
The ongoing US-China trade tensions have forced global companies to consider India as an alternative manufacturing hub, further boosted by the government’s production-linked incentive (PLI) schemes. During PM Modi’s February meeting with President Trump, India signaled a conciliatory stance on tariffs, with a formal trade agreement reportedly in the pipeline.
Highlights:
India’s safe-haven status bolstered by strong domestic consumption.
Rising investor preference for India as global trade war deepens.
US-India trade deal expected, following conciliatory signals from Delhi.
India’s emergence as a manufacturing alternative strengthens the macro thesis.
