Morgan Stanley cuts December 2025 Sensex target by 12% to 82,000 levels

Analysts at Morgan Stanley led by Ridham Desai, their head of India equity research & India equity strategist, have cut their December 2025 target for the Sensex by 12 per cent to 82,000 as their base case from 93,000 levels predicted earlier. 

 

However, this target is still around 7 per cent higher from the current levels, and Morgan Stanley attaches a 50 per cent probability of the index hitting this mark by December 2025. 

 

“This level assumes continuation in India's gains in macro stability via fiscal consolidation, increased private investment, and a positive gap between real growth and real rates. Robust domestic growth, slow growth in the US but no recession, and benign oil prices are also part of our assumptions. In our base-case, we also assume that the bulk of the tariff news is out,” Desai wrote in a coauthored note with Upasana Chachra, Bani Gambhir and Nayant Parekh.

 

 

In such a scenario, Morgan Stanley expects another 50 basis point (bps) cut in short-term interest rates and a positive liquidity environment as the base case for monetary policy. 

 

As an investment strategy, Morgan Stanley remains overweight on financials, consumer cyclicals, and industrials; and are underweight on energy, materials, utilities and healthcare. 

 

“We do not anticipate a bunching of issuances and the retail bid keeps its nose ahead of the supply. Sensex earnings compound at 16 per cent annually through fiscal 2027-28 (FY28),” the note said.

 

In a bull-case scenario, Morgan Stanley sees the Sensex at 91,000 levels (down from the earlier target of 105,000 levels forecast in March 2025) by December 2025 and attaches a 30 per cent probability to this.  

Morgan Stanley sees Indian markets outperform global peers

 

For the Sensex to reach this target, government reforms, Morgan Stanley said, need to surprise on the upside with a slew of GST rate cuts and some progress on farm laws. Earnings growth, it said, needs to compound at 18 per cent annually over FY25-28.

 

“Oil prices (Brent) are persistently below the $70 a barrel, resulting in lower domestic inflation and prompting more rate cuts from the RBI. The global trade war is curtailed by reversals in positions on tariffs, leading to improved growth prospects," it said.

 

Bear-case scenario: Sensex crashes to 63,000

 

On the other hand, if crude oil prices were to surge past $100 a barrel, the RBI ends up tightening to protect macro stability, global growth slows meaningfully, and notably the US slips into recession, it then sees Sensex hit the 63,000 mark (bear-case scenario), to which it attaches 20 per cent probability.

 

In a bear-case, Morgan Stanley expects earnings to compound at 13 per cent annually over FY25-28, with perceptibly lower growth in FY26 and equity multiples de-rate to reflect poor macro conditions. 

 

“While India's domestic growth cycle could be on the mend, a global recession or a near recession would challenge our call and keep Indian equities closer to our bear case for 2025. India's potential trade deal with the US may take time, but we think it is more likely than not and could help India gain share in US trade,” Desai wrote.

 

Morgan Stanley sees a structural rise in equity holdings on household balance sheets being supplemented by higher global allocations to India as the country's index weight rises. 

 

"This domestic bid in turn means that India has a more reliable supply of risk capital dovetailing into less volatility in equities and more predictable growth – a virtuous cycle we have never seen before in India," the note said.