Morgan Stanley lowers SENSEX target for December 2025 by 12%; here's why

Global investment bank Morgan Stanley has revised SENSEX target for December 2025 down by 12% to 82,000, compared to its earlier forecast of 93,000. Despite the downgrade, the revised target still implies a 10% upside from Friday’s closing of 75,157.

The trimmed projection reflects a more cautious stance due to rising global uncertainties, including elevated geopolitical tensions, volatile oil prices and the unpredictable trajectory of US tariffs. Morgan Stanley, however, continues to express confidence in India’s medium-term growth cycle, citing macroeconomic stability, policy predictability, and a favourable real growth-real rate gap.

At the 82,000 level, the SENSEX would trade at a trailing P/E multiple of 23 times above the 25-year average of 21 times indicating optimism around India’s long-term fundamentals.

Base, bull, and bear case scenarios

Morgan Stanley has outlined a range of scenarios in its base case scenario, which has a probability of 50% probability, SENSEX is pegged at 82,000, assuming robust domestic growth, benign oil prices, no US recession and 50 basis points (bps) cut in short-term interest rates.

In bull case with a 30% probability SENSEX is pegged at 91,000, assuming oil prices stay below $70/barrel, the RBI enacts further rate cuts and government reforms (e.g., GST cuts and progress on farm laws) exceed expectations. Earnings growth in this scenario could reach 18% annually through FY2028, Morgan Stanley noted.

In its bear case which has 20% probability, SENSEX could fall to 63,000 if oil prices soar past $100/barrel, RBI tightens policy, global growth falters and the US slides into recession. Earnings growth may slow to 13% annually, with equity multiples compressing, Morgan Stanley added.

Sector strategy and outlook

Given rising external risks, Morgan Stanley is paring back active sector positions across the board—from 180bps to 80bps—and shifting towards a more neutral, stock-picking-focused strategy.

Morgan Staley is overweight on financials, consumer cyclicals and industrials and has an underweight stance on energy, materials, utilities and healthcare.

Economic forecasts revised downward

Morgan Stanley has also revised India’s GDP growth forecast for FY25 to 6.1%, citing the dampening effect of tariff-related uncertainty on global trade. Although high-frequency data suggests a gradual recovery post the policy-induced slowdown in second half of current fiscal, private investment remains tepid. The firm estimates GDP growth to have rebounded to 6.7% in March 2025, driven largely by rural demand and government spending.

In the US, Morgan Stanley has lowered its GDP growth forecast to 0.6% (Q4/Q4) for December 2025—a 90bps reduction—amid slowing momentum and policy uncertainty.