India's equity markets could provide robust returns in near future due to impressive valuations, trailing performance, macro stability and the growth cycle, a report said on Wednesday.
The report from MS Research predicted a 13 per cent upside for BSE Sensex to touch 95,000 by December 2026 citing a 50 per cent probability.
The firm assumed continued fiscal consolidation, higher private investment and a positive gap between real growth and real rates to provide this base case scenario of Sensex touching 95,000.
Sensex earnings were projected to compound at 17 per cent annually through fiscal 2028.
"For the first time in nearly five years, equity valuations look favourable relative to short-term interest rates and our modified earnings yield gap is pointing to upside for equities," the report said.
The firm favoured consumer discretionary and industrials, each predicted to surge by 300 basis points, and financials by 200 basis points, driven by recovering urban demand, GST rate cuts, robust government capex, rising credit growth and low credit costs.
High growth with low volatility and falling interest rates with low beta supports the shift in household balance sheets toward equity, it said. The low beta itself emanates from improved macro stability and the structural shifts in household balance sheets toward equities.
The firm cited policy measures such as repo rate cuts, cash reserve ratio reduction, bank deregulation and liquidity infusion to accelerate India's growth cycle and lift earnings.
Further, front‑loaded capital expenditure and roughly Rs 1.5 trillion in goods and services tax rate cuts skewed are other positive factors. A thaw in relations with China and Beijing's anti‑involution push are cited as additional tailwinds.
FPI positioning remains near lows, but net FPI buying will need growth to recover and bull markets elsewhere to fade plus a rise in corporate issuances. Downside risks arise from slowing global growth and worsening geopolitics, it noted.
(With inputs from IANS)
