Sensex at 89,000 by June 2027? Morgan Stanley picks 7 stocks to ride India’s next capex cycle – Market News

The report, released on May 12, said sectors linked to private capital expenditure, rising consumption and easier monetary conditions could remain market favourites over the next 12 to 18 months. Morgan Stanley stayed overweight on financials, industrials and consumer discretionary stocks while remaining cautious on energy, healthcare and materials.

Among the brokerage’s preferred names, Adani Power, Larsen & Toubro, ICICI Bank, Bajaj Finance and Maruti Suzuki India stood out in the focus list.

Adani Power remains one of Morgan Stanley’s strongest utility calls

Adani Power emerged as one of the standout names in Morgan Stanley’s focus list. The brokerage retained its ‘Overweight’ rating on the stock after the company delivered a 117% return over the past 12 months, outperforming the MSCI India index by 108%.

Morgan Stanley linked its positive stance to the next leg of India’s capital expenditure cycle, particularly in energy infrastructure and data centres.

“Energy, mining, defence, fertilisers, semi-conductors and data centres are the likely new capex drivers for India,” Morgan Stanley said in the report.

The brokerage acknowledged that utilities valuations have turned expensive after the recent rally, though it still sees long-term support from rising electricity demand and industrial expansion.

Morgan Stanley also said India is becoming “one of the fastest growing places for energy infrastructure” as investments tied to digital infrastructure continue to increase.

Larsen and Toubro seen benefiting from private capex revival

Morgan Stanley retained its ‘Overweight’ rating on Larsen & Toubro as well. This after the brokerage sharpened its bullish stance on industrials. The stock has gained 20% over the past year and outperformed MSCI India by 15%, according to the report.

The brokerage said easing liquidity conditions, lower interest rates and stronger government spending are setting the stage for a broader private investment recovery.

“A pickup in private capex drives our overweight,” Morgan Stanley said while explaining its preference for industrial companies.

The report also stated that earnings momentum is “likely turning sharply” after the slowdown seen across the previous six quarters.

Morgan Stanley expects broad market earnings growth at 10% in FY27, 15% in FY28 and 22% in FY29.

ICICI Bank and Bajaj Finance remain central to financials call

Financials continued to remain one of Morgan Stanley’s preferred sectors as the brokerage argued that banks and lenders are entering a stronger earnings cycle.

“NIMs are troughing. Strong credit growth and benign credit costs help a strong earnings cycle for banks,” Morgan Stanley said.

ICICI Bank remained part of Morgan Stanley’s focus list despite underperforming over the past year. The stock has declined 12% during the period and lagged MSCI India by 15%.

Bajaj Finance also retained an Overweight rating after generating an 8% return over the last 12 months and outperforming MSCI India by 4%.

Morgan Stanley said domestic cyclicals are likely to outperform externally linked sectors as India’s macro conditions improve further.

“Domestic Cyclicals > Defensives and External-facing sectors,” the brokerage said in its portfolio positioning section.

The report added that domestic equity inflows remain strong while foreign positioning in India is still near multi-year lows.

Maruti Suzuki, Trent and Lenskart part of consumption-focused basket

Morgan Stanley also increased its conviction on consumer discretionary stocks as lower borrowing costs and tax relief measures support spending demand.

“We expect strong consumption growth helped by lower interest rates, the effect of lower taxes and better overall income growth,” the brokerage said.

Maruti Suzuki India remained among Morgan Stanley’s top stock ideas. The stock has delivered an 11% return over the past year, outperforming MSCI India by 6%.

Retail-focused companies also featured prominently in the brokerage’s preferred basket. Trent retained an Overweight rating despite a 19% decline over the previous 12 months, underperforming MSCI India by 22%.

Lenskart Solutions also featured in the focus list with an Overweight recommendation.

Morgan Stanley said India’s “growing consumer base, with rising incomes of a relatively young population” remains one of the strongest long-term supports for domestic consumption.

Morgan Stanley projects 15% upside for Sensex by June 2027

Morgan Stanley’s base case projects the Sensex at 89,000 by June 2027 with a 50% probability. The brokerage’s bull case places the index at 1,00,000 while the bear case stands at 66,000.

The brokerage expects India’s GDP growth at 7.6% in FY27, followed by 6.7% in FY28 and 7% in FY29.

Morgan Stanley said India’s macro environment has improved after post-pandemic tightening measures and lower policy uncertainty. The report also pointed to trade agreements with the United States and the European Union, along with improving relations with China, as supportive factors for growth.

“Earnings growth is turning after a six-quarter mid-cycle slowdown and is likely to accelerate further,” Morgan Stanley said.

Conclusion

The brokerage warned that geopolitical tensions and higher crude oil prices remain the biggest external risks for Indian equities over the coming months. Even so, Morgan Stanley maintained that India could continue gaining share in global growth as manufacturing activity expands and domestic demand remains firm.

Disclaimer: This article contains specific investment ratings, price targets, and sectoral projections that should not be construed as financial advice. Stocks mentioned, including large-cap and infrastructure names, are subject to market volatility and brokerage projections may change based on evolving economic data. Readers are encouraged to consult a SEBI-registered investment advisor before making any buy, sell, or hold decisions based on these market predictions.

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