Is the worst over for Indian markets? Or is the recovery a temporary relief? Corporate earnings, valuations and steep volatility in currencies are not comforting
According to Morgan Stanley, benchmark index Sensex may reach 82,000 by the year-end, downgrading from its earlier target of 93,000.
Image: Reuters/Francis Mascarenhas/File Photo
Even with battered sentiment and anxiety around uncertain rising tariffs, Indian stock markets have staged a comeback in just few weeks. However, the real concern is if such a recovery is resilient, or the rally is built on wafer-thin expectations of global economic environment getting back to its feet.
Analysts believe it is the latter. Factors such as significant disruption of global economies due to a potential trade war, slowdown in domestic capex, weak corporate earnings, valuation metrics of stocks, steep volatility in currencies and sluggish consumer demand may have a negative influence on stock markets recovery in India. Besides, foreign institutional investors have been wary of parking funds into domestic shores as they see Indian stocks as riskier asset as of now.
According to Morgan Stanley, benchmark index Sensex may reach 82,000 by the year-end, downgrading from its earlier target of 93,000.
“This level assumes continuation in India's gains in macro stability via fiscal consolidation, increased private investment, and a positive gap between real growth and real rates. Robust domestic growth, slow growth in the US but no recession, and benign oil prices are also part of our assumptions. In our base case, we also assume that the bulk of the tariff news is out,” says Ridham Desai, MD and chief equity strategist India, Morgan Stanley.
Morgan Stanley has also slashed corporate earnings estimates about 13 percent by FY26 driven by the global situation.