Sensex likely to give a return of 18 per cent by December 2025: Morgan Stanley

The report highlighted a positive outlook for India's equity market, driven by strong macroeconomic stability, fiscal consolidation, and increased private investments.

It said "18 per cent upside to BSE Sensex to Dec-25 in base case, we assume continuation in India's gains in macro stability via fiscal consolidation, increased private investment and a positive gap between real growth and real rates".

Morgan Stanley's base-case scenario assumes a continuation of India's progress in maintaining macro stability. This includes a sustained positive gap between real economic growth and real interest rates, which supports robust domestic growth.

Other key assumptions include no recession in the United States, benign crude oil prices, and a stable global economic environment.

The report also factors in a modest reduction in interest rates and a positive liquidity scenario as part of its monetary policy assumptions. Additionally, it anticipates no significant bunching of bond issuances, with strong retail participation expected to outpace supply.

It said "Robust domestic growth, no recession in the US and benign oil prices are also part of our assumptions".

In terms of corporate earnings, the report mentioned that the Sensex earnings are expected to compound at an annual growth rate of 17.3 per cent through FY2027.

Morgan Stanley's projections are 15 per cent higher than the consensus estimates for the same period, reflecting optimism about India's economic resilience and corporate performance.

The report's outlook highlights confidence in India's ability to attract investments and sustain growth, supported by favourable policy measures and a stable economic environment. If the assumptions hold, investors could see significant returns in the equity market over the next two years.

The report added with strong earnings, macro stability and domestic flows, it is hard to argue against India's investment case. (ANI)