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Morgan Stanley has given a BSE Sensex target of 74,000 implying upside potential of 14 per cent to December 2024. This level suggests that the BSE Sensex will trade at a trailing P/E multiple of 24.7x, ahead of the 25-year average of 20x.

The premium over the historical average reflects greater confidence in the medium-term growth cycle in India, the brokerage said.

This is the Base case with a 50 per cent probability with BSE Sensex at 74,000. This assumes continuity in a government with a majority mandate, robust domestic growth, the US does not slip into a protracted recession and benign oil prices.

Government policy remains supportive, and the RBI executes a calibrated exit from its current hold stance. Sensex earnings compound 21.5 per cent annually through F2026E.

The bull case with a 30 per cent probability is of the BSE Sensex at 86,000. This assumes that in addition to the above, oil prices dip into the $70s or below resulting in lower domestic inflation and deeper rate cuts from the RBI, the US growth cycle renews with global share prices responding with a strong up move and bond flows surprise to the upside.

Earnings growth compounds 24 per cent annually over F2023-26E.

The Bear case with a 20 per cent probability is of the BSE Sensex at 51,000. This assumes that India's elections deliver an unclear mandate with a change in government, oil prices surge past $110/barrel, the RBI ends up tightening to protect macro stability and a US recession leads global growth lower.

Sensex earnings compound 15.5 per cent annually over F2023-25E with meaningfully slower growth in F2025 and equity multiples de-rate to reflect poor macro conditions, the report said.