Sensex 2026 bull case target at 1,07,000 as per Morgan Stanley; Check its top bets

Brokerage firm Morgan Stanley expects the Sensex index to gain 13% from current levels to reach levels of 95,000 until December 2026.

In its note on Tuesday, November 18, Morgan Stanley said that it has assigned a 50% probability for the above base case to play out over the next 12 months.

The Sensex target means that the index will have a trailing price-to-earnings multiple of 23.5 times, which is ahead of the historical 25-year index average of 22 times.

Morgan Stanley believes that 2026 is likely to be a macro trade in stocks, which will be a transition from the stock-picking environment of 2025.

For its bull case, Morgan Stanley has assigned a target of 1,07,000 for the Sensex, which implies a potential upside of 26% from current levels. The brokerage said that India's long-term story is gaining strength with the government policy action and a cyclical recovery backed by the policy pivot.

The bull case scenario has a 30% probability of playing out, according to Morgan Stanley.

On the downside, Morgan Stanley has a target of 76,000 for the Sensex for its bear case scenario. It said that most of the risks to their estimates are stemming from overseas and not domestically.

Here are some of the key portfolio themes that the brokerage is betting on:

Consumer Discretionary

Morgan Stanley is "overweight" on this theme by 300 basis points as it expects a recovery in urban demand, which will aid in the overall consumption trend. It added that the GST cuts augur well for the sector.

Industrials

The brokerage is "overweight" on this theme as well by 300 basis points led by robust government capex and a pick-up in private capex.

Financials

Rising credit growth and low credit costs are offset by likely compression in the Net Interest Margins (NIMs) of these lenders. Deregulation is positive for the lenders, according to Morgan Stanley, which is "overweight" on the sector by up to 200 basis points.

The brokerage remains equalweight on Communication Services, Consumer Staples and Technology, while it is underweight on Utilities (by 100 bps), Energy (200 bps), Healthcare (200 bps) and Materials (300 bps).