Indian equities poised for strong year over earnings growth, policy tailwinds: Report

NEW DELHI: Indian equities are set for a strong year ahead due to acceleration in earnings growth and reflationary policies of the RBI, along with policy moves such as rate cuts, bank deregulation and liquidity infusion, a report said on Wednesday.

The report from Morgan Stanley said strong capital expenditure in energy, defence, semiconductors, fertilisers and data centres along with large tax cuts are other factors likely to drive an earnings upswing.

The investment bank forecasted a reversal after a six‑quarter slowdown as valuations and sentiment sit near extremes.

The report predicted a base case scenario of BSE Sensex touching 89,000, implying upside of about 15 per cent through June 2027.

Trade deals with the US and the EU and thawing of China relations, along with stronger domestic equity flows and an undervalued currency on a real effective basis, also support the bullish outlook.

Ridham Desai, Equity Strategist, favoured domestic cyclicals over defensives and external‑facing sectors, and went overweight on financials, consumer discretionary and industrials.

Desai gave underweight calls on Energy, materials, utilities and healthcare. "We are capitalisation-agnostic. IT services could be the dark horse as the world pivots to these companies to build AI applications," he said.