India Set to Outperform Emerging Markets in 2025, with BSE Sensex Targeting 93,000, Says Morgan Stanley

India is poised to be one of the best-performing emerging markets (EMs) in 2025, with the benchmark BSE Sensex projected to hit 93,000 by the end of the year, according to global brokerage firm Morgan Stanley.

Positive Outlook for India’s Market

Morgan Stanley highlights several factors contributing to India’s strong investment case, including robust earnings, macroeconomic stability, and consistent domestic inflows. The firm’s base-case target of 93,000 for the Sensex implies an 18% upside potential by December 2025. This target reflects a price-to-earnings (P/E) multiple of 23x, ahead of the 25-year average of 20x.

The brokerage notes that the premium over the historical average is due to heightened confidence in India’s medium-term growth cycle, lower market volatility, a higher terminal growth rate, and a predictable policy environment.

Key Drivers for Sensex Growth

Morgan Stanley outlines a 50% probability for its base case, predicting the Sensex will reach 93,000 by December 2025. Several factors underpin this scenario:

• Continued fiscal consolidation and macro stability in India
• Increased private investment and positive growth rates
• Robust domestic economic growth, no US recession, and stable oil prices
• A modest reduction in interest rates and a favorable liquidity environment

The firm also expects Sensex earnings to compound at 17% annually through FY2027, with growth driven by a private capital expenditure cycle, improving corporate balance sheets, and a rise in discretionary consumption.

Bull and Bear Scenarios for Sensex

Morgan Stanley also presents a bull case and bear case for the Sensex’s performance in 2025:

• Bull Case: The Sensex could reach 105,000, with a 30% probability. This scenario assumes low oil prices, reducing domestic inflation, further rate cuts by the RBI, and stronger economic growth in India, alongside favorable global conditions.
• Bear Case: In the unlikely event of economic setbacks, the Sensex could fall to 70,000, with a 20% probability.

Investment Strategy

Morgan Stanley suggests that stock picking will be key in the market, rather than a broad macro-driven approach. The firm remains overweight on sectors such as Financials, Consumer Discretionary, Industrials, and Technology, while being underweight on other sectors.

With strong fundamentals and a stable macroeconomic environment, India’s equity market continues to attract significant investor interest as it heads into 2025.