Sensex 2025 target: Morgan Stanley sees index at 82,000 despite stock market rally

Sensex 2025 target: Global brokerage firm Morgan Stanley has revised its target for the BSE Sensex to 82,000, reduced from 93,000, indicating an expected upside potential of 9% by December 2025.

Morgan Stanley analysts Ridham Desai and Nayant Parekh noted that the relationship between India's returns and those of global equities is decreasing and currently sits below historical averages.

Diminished global markets limit absolute returns, while a worldwide bullish trend might lead to relative underperformance in a low-beta market such as India. Consequently, India is considerably outperforming the existing global downturn, even as the index may hit multi-month lows.

“We cut our earnings estimates about 13%, and our December 2025 Sensex target is 12% lower,” said analysts Ridham Desai and Nayant Parekh in the report.

In Morgan Stanley's sector model portfolio, the brokerage lowers its active positions from an average of 180 basis points to 80 basis points to signify a shift from a macro-driven market to one where stock selection will be crucial for portfolios.

"We are overweight on financials, consumer cyclicals, and industrials; underweight on energy, materials, utilities, and healthcare. We are capitalization-agnostic following recent developments, cutting back on our preference for small and mid-cap over large," added Morgan Stanley in its report.

Sensex today

The Sensex participated in a global relief surge on Tuesday following US President Donald Trump's indication that he may provide additional tariff exemptions, positioning domestic indices to recover losses incurred since the tariffs were declared earlier this month. The Sensex exceeded its closing level of 76,617.44 from April 2.

New December 2025 Sensex target is 12% lower

Morgan Stanley's base projection indicates that the BSE Sensex could reach 82,000, which is based on the expectation that India will maintain its macroeconomic stability through fiscal discipline, heightened private investment, and a favourable difference between real growth and real interest rates. Their assumptions also include strong domestic growth, sluggish growth in the US without entering a recession, and stable oil prices.

“In our base case, we also assume that the bulk of the tariff news is out. We use another 50bps reduction in short-term interest rates and a positive liquidity environment as the base case for monetary policy. We do not anticipate a bunching of issuances and the retail bid keeps its nose ahead of the supply. Sensex earnings compound at 16% annually through F2028,” the brokerage said.

In an bull scenario, Morgan Stanley projects the Sensex reaching 91,000 points (down from the previous forecast of 105,000 points made in March 2025) by December 2025, assigning a 30 percent likelihood to this outcome. For the Sensex to achieve this milestone, the firm indicated that government reforms must exceed expectations, including a series of GST rate reductions and progress on agricultural legislation. Additionally, it stated that earnings growth needs to average 18 percent annually over FY25-28.

“Brent crude oil prices remain consistently under $70 per barrel, leading to decreased domestic inflation and encouraging further rate reductions from the RBI. A reduction in global trade tensions due to a reversal of tariff positions will also result in enhanced growth prospects," the report noted.

Conversely, if crude oil prices were to rise above $100 per barrel, the RBI would likely tighten monetary policy to maintain macroeconomic stability. This would lead to a significant slowdown in global growth and potentially push the US into recession; as a result, Sensex could fall to 63,000 points (in a bearish scenario), which carries a 20 percent probability.

Equity market strategy

Morgan Stanley's report highlighted that India's low beta is contributing to its strong performance during the global selloff, despite the possibility of the index hitting multi-month lows. Key factors specific to India include ongoing accommodative measures from the RBI, stimulus from GST rate reductions, a trade agreement with the US, and forthcoming growth data.

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