Morgan Stanley Predicts Sensex at 1,07,000 by December 2026
Dalal Street is poised for a multi-year rebound, with Morgan Stanley projecting the Sensex to reach 1,07,000 by December 2026. The benchmark index could cross the 1,00,000 mark as markets regain momentum lost since September 2024.
Key Takeaways
- Sensex target: 1,07,000 by Dec 2026 (bull case), 95,000 (base case)
- Nifty target: 29,000 by Dec 2026 (Goldman Sachs projection)
- Drivers: Foreign investor positioning at historic lows, strong domestic flows, normalized valuations
Market Recovery Fundamentals
Morgan Stanley’s analysis points to several factors supporting a sustained rebound. Foreign investor ownership has fallen to 17% – below domestic institutional holdings for the first time – creating the “lightest positioning in history.” Meanwhile, domestic fund flows remain structurally strong, and valuations have normalized after 2025’s underperformance.
The brokerage noted this combination “offers the bedrock for a multi-year rebound” as markets shift from stock-picking to macro-driven trades.
Goldman Sachs Echoes Optimism
Goldman Sachs recently upgraded Indian markets to “overweight” and set a Nifty target of 29,000 by December 2026. This reverses their October 2024 downgrade and places India at the top of their Asian allocations.
“Dalal Street is on course to re-emerge as one of the most resilient growth stories,” Goldman Sachs stated.
The upgrade reflects expectations of 14% profit growth in 2026 (up from 10% this year) and nominal GDP growth around 11%.
Structural Economic Shifts
Morgan Stanley describes the rebound as part of a “longer structural reset” in the economy. Key factors include reduced inflation and growth volatility due to macro-stability reforms, fiscal consolidation, and falling oil intensity.
“This is pushing India into a virtuous cycle of lower volatility, lower real rates and higher equity valuations,” the report stated.
The brokerage expects Sensex earnings to grow 17-19% annually through FY28, supported by rising private investment and stronger bank balance sheets.
Valuation Context and Risks
Despite trading at 23 times forward earnings – making Indian equities the most expensive in emerging markets – brokerages consider valuations defensible. They project only a 5% base-case de-rating over two years.
Key risks include slower-than-expected earnings recovery, external shocks, or investor rotation into North Asia if AI momentum strengthens. However, the market appears under-owned after foreign investors sold $30 billion in equities this year, while domestic institutions absorbed record $70 billion in inflows.
