Mumbai: Indian stock markets are more likely to rise than fall in the third quarter of the financial year 2026 (Q3 FY26), Morgan Stanley said in a note on Friday.
The global brokerage remains bullish on Indian equities, expecting strong growth data, supportive moves by the Reserve Bank of India (RBI), and better-than-expected corporate earnings to push the market higher from July onwards.
According to the firm, India is showing signs of steady improvement. Government spending is increasing, and the RBI appears to be moving towards a more supportive or ‘dovish’ policy stance.
This, combined with easing inflation, is creating a good environment for the stock market.
The brokerage also believes that lower interest rates will help banks lend more, boosting lending growth.
In addition, if global uncertainties reduce, Indian companies may begin to invest more in new projects.
One of the key triggers could be the upcoming corporate earnings season. Morgan Stanley expects many companies to beat market expectations due to lower base comparisons, improved efficiency, and steady demand from consumers.
Looking ahead, the RBI could cut interest rates by 25 basis points in the fourth quarter, which would further support market sentiment.
However, the brokerage also warned that global factors continue to play a big role in India’s market movement.
Tensions around the world, changes in trade policies, or a slowdown in developed countries could negatively impact Indian stocks.
Even though India is generally seen as a relatively stable market, a major global sell-off would still affect domestic equities.
For example, if oil prices fall sharply, it could indicate global economic trouble, which would not be good for markets.
Despite these risks, Morgan Stanley believes that strong participation from retail investors and continued foreign interest will help cushion any downside.
Indian equities also benefit from a ‘scarcity premium’ and long-term reforms like GST changes and infrastructure development, which add to investor confidence.
Although valuations are currently high compared to historical levels, the brokerage feels they are justified given the strong earnings outlook.
In the long run, India’s stable policies and growth potential make it one of the most attractive markets among emerging economies, Morgan Stanley said.
(IANS)
