Weakness gripping India’s share market presents a rare buying window for patient investors, according to a new Morgan Stanley report. Released on Wednesday, the analysis urges looking beyond near-term turbulence to the brighter horizon ahead.
The brokerage asserts that India’s core economic pillars remain rock-solid. Even as markets grapple with volatility, earnings growth is poised for a sharp uptick by 2026. This outlook holds firm irrespective of short-term swings.
Markets have shown a bias toward bad news, reacting sharply while downplaying positives, which has fueled fears of underlying problems. Morgan Stanley counters this narrative, viewing the pullback as driven by technicals and positioning, not economic distress.
A six-quarter earnings slump is ending, with recovery signs emerging. Projections point to accelerated profits in 2026, fueled by RBI and government stimulus. Key tailwinds include interest rate reductions, regulatory easing for banks, liquidity infusions, ongoing capex, tax incentives, and a pro-growth budget.
The era of stringent post-pandemic policies is winding down, creating fertile ground for expansion. Despite these positives, the last year’s stock returns rank among the poorest on record, with relative valuations scraping bottom.
Notably, India’s contribution to global profits dwarfs its index weighting, and the benchmark Sensex is undervalued versus gold historically. FPI flows have turned negative recently, exacerbating the dip.
Investors with a long view should capitalize on this setup. The dip is temporary, and with earnings revival on deck, substantial rewards await those who buy now.