Morgan Stanley has issued an upbeat forecast for India’s Sensex, predicting an 18% rise by the end of December 2025. This projection places India as one of the best-performing emerging markets, attributing the anticipated growth to strong macroeconomic stability supported by favorable trade terms and a flexible inflation target.
The investment bank’s report highlights several factors contributing to this optimistic outlook. A significant earnings growth of 18–20% is expected over the next four to five years, fueled by a renewed private capital expenditure cycle and the re-leveraging of corporate balance sheets. Additionally, a structural rise in discretionary consumption and the availability of reliable domestic risk capital are seen as driving forces behind the projected surge.
Morgan Stanley also points to ongoing infrastructure spending, GST rate restructuring, direct tax reforms, additional free trade agreements, and a focus on energy transition as key areas enhancing India’s macro stability. The report anticipates a shallow cycle of interest rates, with two consecutive rate cuts of 25 basis points each starting from February, and highlights the Reserve Bank of India’s commitment to durable liquidity, along with the potential easing of regulatory tightening.
The base case scenario assumes robust domestic growth, no recession in the U.S., and stable oil prices. With a modest reduction in interest rates and a positive liquidity environment, Morgan Stanley’s forecast paints a promising picture for India’s economic future and stock market performance in 2025, avoiding any significant issuance bunching while maintaining strong retail bids.
