Sensex Likely to Surge 18% by End of 2025, Says Morgan Stanley
India is poised to shine as one of the top-performing emerging markets in 2025, with the Sensex projected to rise by 18% by December, according to global investment bank Morgan Stanley.
Mumbai: India is poised to shine as one of the top-performing emerging markets in 2025, with the Sensex projected to rise by 18% by December, according to global investment bank Morgan Stanley.
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In its latest analysis, the US-based brokerage highlights strong macroeconomic stability, driven by improving trade dynamics and a flexible inflation target. Morgan Stanley forecasts an earnings growth rate of 18–20% over the next 4–5 years.
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Key Drivers of Growth:
- Private Capital Expenditure Cycle: A resurgence in corporate balance sheet leveraging is expected to fuel growth.
- Rising Discretionary Consumption: A structural increase in consumer spending is anticipated.
- Robust Domestic Risk Capital: Domestic sources of investment are providing significant support for capital expenditure.
Government Initiatives Boosting Stability:
- Increased infrastructure spending.
- Restructured GST rates and direct tax reforms.
- Expanded free trade agreements.
- Focus on energy transition.
Interest Rate Outlook:
Morgan Stanley expects the Reserve Bank of India (RBI) to adopt a shallow rate-cutting cycle starting February, with two consecutive cuts of 25 basis points each. The RBI’s commitment to durable liquidity and potential easing of regulatory tightening could further bolster growth.
Strong Market Fundamentals:
Initial issuance in Indian markets is currently at 1.3% of GDP, significantly below the previous peak of over 3.5%. The firm expects this figure to rise, supported by robust domestic growth, no US recession, and stable oil prices.
Morgan Stanley projects a modest reduction in interest rates and a positive liquidity environment as key drivers for monetary policy. Retail demand for issuances is anticipated to outpace supply, creating a favorable investment climate.
India’s growth story remains compelling, supported by favorable macroeconomic conditions and strategic government initiatives, positioning the country for significant equity market gains in 2025.
