Morgan Stanley Forecasts Recovery for Indian Market Valuations

Morgan Stanley released a report on July 6, 2026, stating that the recent decline in Indian market valuations is cyclical and temporary rather than structural. The brokerage argues that a recovery in economic growth, combined with lower foreign investor ownership and subdued recent performance, creates a favorable environment for a boost in equities.

The firm dismissed concerns that artificial intelligence or declining fertility rates would cause a structural de-rating. While Morgan Stanley noted that AI may challenge services exports in the near term, it suggests the technology offers medium-term productivity gains. The firm maintains a bullish outlook based on increased investments, a growing consumer base, and a multi-polar global economy.

Future market sentiment will depend on whether India's economic growth accelerates or if global optimism regarding AI capital expenditure moderates. Morgan Stanley expects the upcoming quarterly earnings season to provide further positive signals for investors.