7% Recovery in 5 Days: Morgan Stanley bullish on India; highlights top sectors for investors

Equity markets fell sharply on Thursday, snapping a five-day rally, even as global brokerage Morgan Stanley flagged a potential recovery for Indian stocks in the coming months.

The BSE Sensex dropped 931.16 points to 76,631.74, down 1.20 per cent, while the NSE Nifty declined 222.25 points to 23,775.10, falling 0.93 per cent. Profit booking at higher levels and weak global cues weighed on sentiment after a strong rebound that had lifted indices for the first time in weeks.

Selling pressure increased in the last hour. The session remained volatile throughout the day.

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This correction comes after a rare stretch of strength. For the first time since 17 November 2025, Nifty and Bank Nifty had closed higher for five consecutive sessions.

Rally before the fall: What drove the surge

The recent rally was sharp and broad-based.

In the last five sessions, Sensex jumped 7.02 per cent. Nifty also gained nearly 7 per cent in the same period.

However, the broader trend remains weak. On a year-to-date (YTD) basis, Sensex is still down around 10 per cent. Nifty is also lower by about 9 per cent this year.

From its lifetime high, Nifty remains nearly 8 per cent lower.

The rally was largely driven by easing global concerns.

Oil prices cooled in recent weeks. At the same time, a two-week ceasefire in West Asia reduced fears of supply disruptions.

This helped improve risk sentiment. Markets, which were reacting sharply to crude price moves and geopolitical headlines, found some stability.

Another key factor was volatility. India VIX fell sharply during the rally phase. This indicated reduced market fear and a return of short-term confidence.

Why markets corrected today

The fall on Thursday was largely due to profit booking.

After a sharp 5-day rally, investors chose to lock in gains at higher levels.

Weak global cues also added pressure.

Markets tend to react not just to improving conditions, but also to the absence of further negative surprises. Once the trigger fades, momentum often slows.

Is the recovery sustainable?

The key question now is whether this rebound can sustain.

Global brokerage Morgan Stanley remains constructive on India.

According to its India strategy note, multiple factors support a potential recovery in the coming months.

• Trailing performance and valuations remain supportive
• Earnings outlook is stable
• Market positioning indicates room for upside

The brokerage also noted that the RBI’s actions have supported sentiment around the rupee, which it believes remains undervalued.

Policy momentum remains strong. Domestic flows have also held firm despite recent market volatility.

Sector view: Where is the opportunity

Morgan Stanley prefers domestic cyclicals over defensives.

• Overweight: Financials, Consumer Discretionary, Industrials
• Underweight: Energy, Materials, Utilities, Healthcare

The strategy reflects a view that domestic growth drivers may outperform global-facing sectors.