Bull Run To Continue, Sensex Can Hit 82,000 In A Year: Morgan Stanley
Morgan Stanley said that while the bull market in the country is ageing, it is still young in terms of returns.
India's equity market is seeing the longest and the strongest bull market ever, according to Morgan Stanley, which expects the S&P BSE Sensex to hit the 82,000 mark by June 2025. This comes as the brokerage said that share prices have yet to bake in several positives on the macroeconomic front.
The most important aspect of the Bharatiya Janata Party-led National Democratic Alliance retaining its majority is policy predictability, which is something equities tend to thrive on. The election outcome is likely to usher in more structural reforms and reinforce their forecast of 20% annual earnings growth over the next five years, the brokerage said in a note on Wednesday.
Morgan Stanley said that while the bull market in the country is ageing, it is still young in terms of returns. "We believe this is set to be India's longest and strongest bull market ever. Stay invested."
While there are positives, the brokerage also said that there are plenty of risks for India's equity market like healthcare, education, and skills training.
The brokerage prefers cyclical stocks over the defensive ones and large caps over small and mid-caps. Morgan Stanley is overweight financials, technology, consumer discretionary and industrials while being underweight in other sectors.
The macro trade could peak in the coming weeks and from a five-year perspective, the brokerage likes several themes in consumer, energy, financials, and industrials.
Sensex @ 82,000
Morgan Stanley has a target of 82,000 for the Sensex by June 2025, implies upside potential of 14%. This level suggests that the Sensex will trade at a trailing P/E multiple of 24 times, ahead of the 25-year average of 20 times.
The premium over the historical average reflects greater confidence in the medium-term growth cycle in India, the note said.
Base case for Sensex:
12-month forward Sensex target is 82,000
Continuity in the government means the market can expect macro stability to anchor policy choices.
Robust domestic growth, no recession in US and benign oil prices are part of our assumptions
Sensex earnings compound at 19% annually through FY26.
In their base case, the brokerage is 5% ahead of consensus estimates to F2026.
Bull case For Sensex:
12-month forward Sensex target is 92,000.
Among other positives, oil prices falling below $70s, resulting in lower domestic inflation and prompting rate cuts from the RBI.
The US growth cycle continues, with global share prices responding positively and bond flows surprising to the upside.
Earnings growth compounds at 24% annually over FY24-26.
Bear Case For Sensex:
12-month forward Sensex target is 62,000
Oil prices surge past $110 per barrel and the RBI ends up tightening to protect macro stability
Or the RBI tightens because the Fed raises rates and global growth slows meaningfully.
Sensex earnings compound at 16% annually over F2024-26 with perceptibly lower growth in F2025 and equity multiples de-rate to reflect poor macro conditions.
