Ridham Desai’s Big Statement On Bullish Indian Markets & Headwinds Ahead

At the Republic Business’ India Economic Summit 2025 on Friday, Morgan Stanley India’s Managing Director, Ridham Desai, delivered one of the most unambiguous bullish calls on Indian equities in recent times.

Desai reiterated his long-standing target of Sensex reaching 1,07,000 by the end of 2026 in the bull-case scenario, while the base case still points to 95,000. More importantly, he explained why the next 12-18 months could be “quite good” for Indian markets after what he described as the “worst relative year for India since 1993”.

Desai was candid about 2024-25 being a brutal year for Indian equities on a relative basis. “In the last 12 months, India has been the worst-performing market in the world amongst large markets… This is the worst relative year for India since 1993,” he said.

Three key reasons behind this performance, according to him:

1. Idiosyncratic slowdown in growth because of elections, lower government spending, heavy rains and tight monetary policy.
2. Record-high relative valuations that triggered foreign investor selling.
3. Global obsession with the AI trade, in which India has no direct play.

The good news, Desai stressed, is that all three negatives are either reversing or have already played out.

• Growth is about to “turn quite sharply” after an “unprecedented policy response” from the RBI and the government.
• “In the last six-eight months, we’ve had such multiple policy responses that if India’s growth doesn’t turn, we’ll all have to retire,” he remarked.
• Relative valuations have corrected from all-time highs to near all-time lows. The AI frenzy is maturing, reducing its drag on non-AI markets like India.

When asked what has fundamentally changed since he was last bearish (2007 and 2013), Desai gave three big takeaways:

• Macro stability and a dramatically stronger national balance sheet

“Our dependence on imported oil has more than halved… Even if oil doubled from here and went to $130, nothing would happen to India,” he said, contrasting it with the 2008 crisis.

• A complete reshaping of the income pyramid

“Twenty years ago, 20% of India’s population was probably not getting dinner. That number is now close to zero.” The rise of mass consumption layers, accelerated by GST rationalisation, has created a consumption engine that accounts for roughly 20% of global growth.

• Manufacturing reforms finally taking root

After “escaping industrial progress” for decades, improvements in infrastructure, taxation, land, labour and logistics are reversing the perennial decline in manufacturing share.

Desai highlighted a stunning shift: India’s market beta has fallen from 1.3 in 2013 to roughly 0.4 today.

“On a trailing 75-day basis, the Nifty is the least volatile market in the world, half as volatile as the US,” he noted, crediting conscious policy choices on inflation targeting that have delivered the lowest inflation volatility among major economies.

With CPI now well below the RBI’s target, the central bank is actively trying to push inflation higher. “The RBI is reflating… and that is great for nominal earnings,” Desai said, adding that successful reflation will drive earnings surprises over the next 12-18 months, the primary reason for his near-term bullishness.

Desai was blunt: “A crash will come because that’s the nature of markets.” But he does not see signs of exuberance yet. “We have not gotten ahead of the game… When your taxi driver tells you, ‘Sir, buy this share’, that’s when a crash becomes imminent. We are nowhere near that.”

Over his 35-year career, he has lived through declines of 50-60% multiple times, yet the Sensex has still compounded at 16%. “Time spent in the market is far more fruitful than timing,” he reminded long-term investors.

When pressed on risks, including possible U.S. tariffs, Desai dismissed tariffs as immaterial and even potentially positive for some Indian sectors.

The real risk? A U.S.-led global recession. “The world cannot grow unless the US is in okay shape… That is the most important risk factor to my outlook.”

Ridham Desai remains “very bullish”, a reputation he jokingly says he can’t shake. With valuations reset, growth inflection imminent, policy levers fully pulled and structural tailwinds stronger than ever, he believes Indian equities are entering a favourable 12-18 month window.

Long-term investors, he argues, have little to fear from short-term noise in what remains one of only two large markets on the planet that have consistently compounded wealth because of an obsessive focus on balance sheets and return on capital.

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The India Economic Summit 2025 is proudly presented by TVS Motor Company. This event is Co-Powered by Adani Group, and Nippon India Mutual Fund, whilst being held in association with Ravin Group, Bhutani Infra and ProstarM. The special partner for this summit is Engineers India Limited (EIL), and the state partner being Haryana Government.