Indian Stock Market Forecast: Sensex Expected to Reach 95,000 by December 2026
Positive Outlook for Indian Stock Market
The Indian stock market is anticipated to experience significant growth, with projections indicating that the Sensex could reach 95,000 by December 2026. According to a report from Morgan Stanley, a new bull market is emerging following one of the most challenging periods for Indian equities in recent history. The firm has set a base-case target for the Sensex at 95,000, suggesting a potential upside of approximately 22% from the closing value of 77,563 on April 8. This valuation is based on a multiple of 23.5 times trailing earnings, which is slightly above the 25-year average of 22 times.
Despite the trailing 12-month performance being among the worst historically, relative valuations have returned to previous lows. Morgan Stanley has outlined both optimistic and pessimistic scenarios for the Sensex. In the optimistic scenario, which has a 30% likelihood, the index could soar to 107,000, driven by oil prices dropping below $70 per barrel, improved trade conditions, and effective reflation strategies. Earnings are projected to grow at an annual rate of 19% from FY25 to FY28.
Conversely, in the pessimistic scenario, with a 20% probability, the Sensex might decline to 76,000 if oil prices remain above $100 per barrel, monetary policies tighten to maintain macroeconomic stability, global growth slows, and a recession occurs in the US. In this case, earnings growth is expected to be around 15% annually, with a slowdown in FY26 and a decrease in valuation multiples.
Several macroeconomic, earnings, and flow indicators are aligning favorably for Indian stocks, even as global investors express caution. However, Morgan Stanley has also pointed out immediate challenges, including supply chain issues in gas and fertilizers due to conflicts in the Middle East, increased defense spending, and the ongoing debate regarding India's lack of a direct presence in artificial intelligence.
The report highlights that the absence of a direct AI strategy poses a significant challenge, particularly as potential disruptions from AI could impact Indian service exports. On Thursday, the market saw a downturn, with the Sensex dropping by 931.25 points, or 1.20%, closing at 76,631.65, while the Nifty index fell by 222.25 points, or 0.93%, to finish at 23,775.10. During intraday trading, the BSE Sensex hit a low of 76,347.90, down 1,215 points, while the NSE Nifty50 fell to a low of 23,683, down 315 points.