- Morgan Stanley has turned constructive on Indian equities, arguing that the market's recent de-rating is cyclical rather than secular, and has built a sector and stock playbook around domestic cyclicals ahead of what it calls India's next growth spurt.
- In its latest India Equity Playbook, the brokerage remains overweight on financials, consumer discretionary and industrials, but also identifies IT services as the dark horse, arguing that global demand for AI applications and enterprise AI solutions could create a fresh growth opportunity for the sector.
- Among stock picks, Morgan Stanley's Focus List includes Lenskart Solutions, Varun Beverages, and Adani Power, which has outperformed the broader index by 86% over the past 12 months.
- The brokerage set a Sensex target of 89,000 for June 2027, implying 14% upside from current levels, with a bull case of 1,00,000 if oil prices fall below $80 a barrel.
- Morgan Stanley believes India's relative performance could improve as the gap between domestic and global growth narrows.
- The brokerage flagged India's chief risks as largely external, including geopolitical tensions and a slowing global economy, while domestic concerns centre on weak farm productivity and capacity bottlenecks.
Morgan Stanley has adopted a positive outlook on Indian equities, asserting that the recent market de-rating is cyclical rather than secular. The brokerage's India Equity Strategy Playbook anticipates a growth spurt driven by domestic cyclicals, with a Sensex target of 89,000 by June 2027, indicating a 14% upside from current levels.1
The report highlights that India's profit share relative to its index weight is at its widest margin outside 2009, suggesting potential for a re-rating as growth data improves. Analysts noted, “We therefore read the de-rating as cyclical, the product of a sharp gap in relative growth.” They expect a pickup in private capex to boost industrials, with sectors like energy, mining, and semiconductors emerging as new capex drivers.
Morgan Stanley's stock picks include Lenskart Solutions and Varun Beverages in consumer names, alongside Adani Power, which has outperformed the broader index by 86% over the past year. The brokerage remains overweight on financials, consumer discretionary, and industrials, while identifying IT services as a potential “dark horse” due to rising global demand for AI solutions.
Despite external risks such as geopolitical tensions and a slowing global economy, Morgan Stanley believes that India's structural reforms and improving domestic growth will support equities. They stated, “We expect high-frequency indicators to continue to exhibit positive momentum.” The report also emphasizes that India's share of global profits now exceeds its global index weight by the widest margin on record outside 2009.6
“The brokerage set a Sensex target of 89,000 for June 2027, implying 14% upside, and expects earnings to compound 16% annually through FY2029. It is overweight financials, consumer discretionary and industrials while underweight energy, materials, utilities and healthcare.”
