RBI’s Easing Cycle and Sensex Predictions: Insights from Morgan Stanley.
Introduction
The recent report by Morgan Stanley offers a comprehensive look into India’s economic landscape, predicting that the Reserve Bank of India (RBI) may embark on a deeper easing cycle. This analysis surfaces amidst lower food inflation and lower oil prices, which could influence the RBI’s monetary policy and the overall market.
Easing Cycle Insights
According to Morgan Stanley, the RBI might respond to lower inflation and a deceleration in growth with a cumulative easing of 100 basis points and potentially two additional cuts by 2025. The forecast suggests that India’s GDP growth will reach 6.1% for FY26, bolstered by favorable economic conditions despite global uncertainties.
Market Predictions and GDP Growth
The brokerage projects that the Sensex could touch 82,000 by December 2025, representing a 9% increase from current levels. Factors contributing to this optimistic outlook include ongoing dovish policies from the RBI, potential GST rate cuts, and bilateral trade deals with the US. Notably, a decline in food and non-food inflation is expected to keep average inflation around 4% in FY26, according to the report.
Domestic Growth Drivers
On the domestic front, rising consumption driven by rural demand and agricultural growth provides a foundation for economic stability. While public spending is on the rise, private capital expenditure remains weaker. Hence, domestic growth is being supported by improved government spending and a favorable RBI stance. As the government continues its fiscal consolidation strategy for FY26, the outlook for India’s earnings cycle appears promising.