Summary of this article
Bull case: Sensex at 1,07,000 by Dec 2026 (30% probability).
Base case: 95,000, says Morgan Stanley Report
Bear case: 76,000 if oil spikes or global growth weakens.
Can the Sensex really climb to 1,07,000 by December 2026? It sounds ambitious, but this is exactly what Morgan Stanley outlines in its India Equity Strategy Outlook 2026. And the important thing is this: the projection isn’t driven by market hype. It is tied to a very specific set of macro conditions that, if they fall into place together, could push Indian equities much higher than most investors currently expect.
The BSE Sensex index that represents the largest 30 companies of the country was hovering a little above 85,000 levels on the eighth day of December 2025.
According to the Morgan Stanley report, Indian equities are experiencing their worst underperformance relative to emerging markets in 31 years. Yet, the brokerage believes the coming year could mark a sharp turnaround. Policy support has strengthened, nominal GDP growth is expected to pick up, liquidity conditions are improving, and earnings seem set to move out of the slow patch seen over the past year. On top of that, foreign portfolio investor exposure is still at historic lows, while domestic investors continue to hold markets steady with consistent inflows. The long-term structural story, according to the report, remains firmly in place given ongoing reforms and fiscal consolidation.
Sensex 1,07,000 Forecast: Morgan Stanley’s Bull Case Explained
Within this broader framework sits the headline-grabbing bull case. Morgan Stanley assigns a 30 per cent probability to the Sensex touching 1,07,000 by the end of 2026. For this to happen, several things need to go right at the same time. Oil prices would have to stay below $65 a barrel, helping India’s terms of trade. Global trade tensions would need to soften, including reversals of earlier tariff measures. Reflation efforts worldwide would have to start showing results, leading to upgrades in growth expectations. And corporate earnings would need to accelerate meaningfully, growing at about 19 per cent annually over FY25 to FY28. If these conditions hold, the brokerage believes investor sentiment and market fundamentals could strengthen enough to lift the index to that level.
Sensex 95,000 by 2026: Morgan Stanley’s Base Case Explained
That said, the bull case isn’t the central view. The base case, which comes with a 50 per cent probability, places the Sensex at 95,000 by December 2026, implying a healthy upside from where markets stand today. This scenario assumes a continuation of India’s macro stability, a pickup in private sector investment, steady domestic and global growth, and no sharp rise in oil prices. As per the Morgan Stanley report, the base case also assumes that India and the US resolve their tariff issues in the coming weeks and that the RBI delivers a 25 basis point cut in short-term rates. The brokerage expects the liquidity environment to remain supportive and does not see heavy bunching of new equity issuances disrupting the market. In this environment, Sensex earnings are expected to grow at 17 per cent CAGR through FY 2028, which helps justify valuations even if the index trades slightly above its long-term average multiples.
What Could Drag the Sensex to 76,000, According to Morgan Stanley?
The report also spells out what could go wrong. In the bear case, which carries a 20 per cent probability, the Sensex could slip to 76,000. This scenario becomes likely if global conditions deteriorate sharply. Oil prices rising above $100 a barrel would put pressure on India’s macro stability, and the RBI may be forced to tighten policy instead of easing, says the report. A slowdown in global growth, especially if the US slips into recession, would weaken demand, hit earnings, and drag down sentiment. The report also mentions that worsening trade conditions between India and the US could add further pressure. Even in this environment, the report says that the earnings would still grow, but at a slower pace of around 15 per cent, and valuations would de-rate accordingly.
Morgan Stanley also outlines its sector view for 2026. The emphasis is clearly on domestic cyclicals, preferring areas like financials, consumer discretionary, and industrials. Defensive and globally linked sectors such as energy, healthcare, utilities, and materials are less favoured. Technology, consumer staples, and communication services sit in the middle with neutral views.
In the end, the Sensex at 1,07,000 remains a possibility, not a guarantee, but a credible scenario if global conditions turn supportive. As per the Morgan Stanley report, India’s underlying strength, policy stability, and earnings potential put it in a better position than many other markets. For investors, the message is simple: the upside in Indian equities is far from exhausted, and how 2026 plays out will depend largely on the macro environment India finds itself in.
