66,000, 89,000 or 1,00,000: Where is Sensex headed in next 1 year?

Global brokerage Morgan Stanley believes the recent correction in Indian equities could be a buying opportunity for long-term investors. The brokerage has projected that the BSE Sensex could rise to 89,000 by June 2026 in its base case scenario, implying an upside of around 8 per cent from current levels.

The brokerage, in its report dated May 12, has also assigned a 30 per cent probability to the Sensex touching the 1 lakh mark over the next 12 months under a more optimistic bull-case scenario.

“Our new Sensex June 2026 target of 89,000 bakes in our revised earnings estimates and is rolled forward from the December 2025 target of 82,000,” Morgan Stanley equity strategist Ridham Desai said in the latest strategy note.

The brokerage said the projected level implies a trailing price-to-earnings multiple of 23.5 times, higher than the 25-year average of 21 times. According to the report, the premium valuation reflects stronger confidence in India’s medium-term growth outlook, lower market volatility and a more stable policy environment.

What Morgan Stanley’s base case assumes

Morgan Stanley has assigned a 50 per cent probability to its base case target of 89,000.

The brokerage expects India’s domestic growth cycle to remain strong, supported by fiscal consolidation, improving private sector investment and supportive monetary conditions. It also assumes there will be no recession in the US and crude oil prices will remain moderate.

The report further expects a favourable India-US trade agreement, another 50 basis points of interest rate cuts and ample liquidity conditions. Under this scenario, Sensex earnings are projected to grow at a compound annual growth rate of 16.8 per cent through FY28.

The brokerage added that domestic retail investors continue to support the market despite volatility.

“Indian stocks remained orderly even during the correction. Persistent retail buying underpins the structural nature of the market,” Desai said.

Sensex at 1 lakh? Here are the conditions

Morgan Stanley’s bull-case scenario projects the Sensex at 1,00,000 by June 2026 with a probability of 30 per cent.

For this to happen, the brokerage said crude oil prices would need to remain below $65 per barrel consistently. It also expects easing global trade tensions, further monetary support from the Reserve Bank of India and additional policy reforms such as GST rate cuts and progress in agricultural reforms.

In this optimistic scenario, earnings growth could accelerate to 19 per cent annually between FY25 and FY28.

Bear-case target at 66,000

Morgan Stanley has also outlined a downside scenario with a 20 per cent probability, where the BSE Sensex could fall to 66,000 by June 2026.

The brokerage said this could happen if crude oil prices surge above $100 per barrel, forcing tighter monetary policy. A sharp slowdown in global growth and a US recession are also part of the bear-case assumptions.

Under this scenario, earnings growth is expected to slow materially and equity valuations may compress.

Financials, consumer stocks remain top bets

Morgan Stanley said it continues to prefer domestic cyclicals over defensive and export-oriented sectors.

The brokerage remains overweight on financials, consumer discretionary and industrials, while remaining underweight on energy, materials, utilities and healthcare sectors.

The report also said the Indian market is increasingly becoming a “stock pickers’ market”, unlike the broad macro-driven rallies seen after the Covid-19 pandemic.

Morgan Stanley added that it remains “capitalisation-agnostic”, indicating that opportunities could emerge across large-cap, mid-cap and small-cap stocks.