Indian stock market ‘growth is returning soon’ in coming days: Morgan Stanley

NEW DELHI: The stock market is set for a 360 degrees transition in the coming days, with a potential recovery following a period of uncertainty and sluggish growth, according to a recent report by Morgan Stanley .
“A growth slowdown has unnerved the market. We believe growth is returning soon,” the firm stated, signalling optimism despite recent market jitters.
“The price fall has been on falling trading volumes implying an absence of a bid rather than a forceful selling. Private financials appear to be offer the best risk-reward ratio,” the report added.
However, the market downturn wave is expected to recede soon.
Additionally, the firm’s proprietary sentiment indicator has entered “buy territory” for the first time since mid-2022.
Although the indicator could still decline further, as seen during the market crash of March 2020, Morgan Stanley believes the current economic landscape does not support a major deterioration in market sentiment.
On the macroeconomic front, the report highlighted accelerating government spending as a key factor in supporting growth. The fiscal consolidation planned for the financial year 2026 is expected to be much smaller than in 2025, reducing economic pressure.
Meanwhile, the Reserve Bank of India (RBI) is committed to injecting liquidity and easing regulatory constraints to stimulate activity.
Retail investors have also shown resilience throughout the downturn, paving the way for a potential market recovery. Their continued participation could play a crucial role in driving an upward trend.
However, the report also warned of risks that could hinder the recovery, including policy missteps, a deeper correction in US markets, and a slowdown in global growth.
While the overall outlook remains positive, the agency advised investors to stay cautious and monitor both domestic and international developments that could impact market performance.