In 2025 so far, the Nifty 50 and Sensex have risen 10% and 9%, respectively, hitting record highs, Desai said while
speaking at the Hindustan Times Leadership Summit 2025. While the world has been in a ferocious bull market, India has
been the outlier, he said, adding that this has been the country’s worst relative year since 1993 in dollar terms.
“Now, as we look forward, India's relative performance has already turned in November," Desai said. “…we're recouping
some of our lost ground. And this has come on the back of a big policy pivot that India itself made starting in February
The Reserve Bank of India’s (RBI's) Monetary Policy Committee (MPC) has cumulatively cut rates by 100 basis points since
February and later announced to cut the cash reserve ratio (CRR) by 100 bps in phases. CRR is the proportion of deposits
that banks must park with RBI.
The central bank has backed this with massive doses of liquidity, as well as an easing of the regulatory burden on the
banking sector, Desai said.
Investors are now watching the upcoming monetary policy on 5 December, amid a sharp depreciation in the rupee. The
currency’s persistent weakness has heightened concerns about foreign outflows and potential pressure on the domestic
economy, as it makes imports more expensive. But strong domestic growth data for July-September has muddied expectations
of a rate cut, prompting traders to dial back risk, especially in rate-sensitive financial stocks.
Desai, however, is confident about a revival in growth. October bank credit shows consumer credit jumping from 7% to 17%
ex-mortgage, backed by government reforms, he said. Nominal growth should enter double digits in 2026, driving a strong
earnings recovery and potentially making India the fastest globally, he said.
Moreover, India’s relative valuations are near all-time lows, and the global artificial intelligence (AI) trade drag is
fading, according to him. “So put all of this together, it (2026) is looking like a very exciting year for Indian
While tech giants are pouring billions of dollars into AI, sparking concerns, Desai does not see a bubble just yet.
Markets remain orderly, not irrational, he said. If a bubble does form and eventually bursts, India’s low-beta profile
means it would outperform on a relative basis, but the absolute downside would still be difficult to escape, pushing the
Nifty closer to the bear case than the base case, he said.
According to Morgan Stanley’s 17 November report, its base case, assigned a 50% probability, pegs the S&P BSE Sensex at
95,000 by December 2026. The bull case, with a 30% probability, pushes the target to 107,000, while the bear case, at a
20% probability, sees the index slipping to 76,000.
On Thursday, the Sensex closed at 85,265.32.
The biggest risk for Desai is a “slowdown in global growth" despite the global action to contain damage from US tariffs.
Desai said the world is entering 2026 with unprecedented stimulus across major economies—the US, Europe, Japan, and
China—deploying fiscal or monetary support. This, he said, has not happened since 2008.
This wave is driven by countries trying to cushion the impact of US tariffs, he said, adding that India has already done
its part in 2025, and others are continuing. These policy actions keep the downside to global growth contained, he said,
adding that without the stimulus, the US tariffs could have caused much deeper damage.
“So the biggest risk to India is that this thing does not work out, and the stimulus falls short of requirement, and
there is some untoward global event, like a war or something of that sort, which then starts affecting global growth,"
India needs support from global growth to maintain its own economic momentum, and that remains the key risk, he said.
In the domestic market, the steady supply of initial public offerings (IPOs) has left market participants worried that
it could dampen the momentum, even as retail flows through systematic investment plans (SIPs) support the equity rally.
And foreign investors have been buying in the primary market and selling in the secondary market.
Desai hopes the capital-raising momentum continues, saying that “it’s very crucial for the progress of this bull market
that companies raise capital and invest."
The economy’s investment rate is closely linked to corporate profits, according to Desai. “In the early stages of an
economic boom– which he believes we’re in–the investment cycle usually runs for a while before those investments turn
unproductive and the cycle ends," he said. “So we're nowhere there at the moment."
For foreign selling to turn into buying, corporate issuances must rise, he said. With trailing 12-month issuance at
1.2–1.3% of GDP, “it has the potential to triple from here without actually upsetting the secondary markets".
India’s ‘strong secular story’
Desai also doesn't blame the delay in India-US trade for market underperformance. The tariff announcement affects goods
worth about 1.2% of India’s GDP, creating a drag of 30-40 basis points, but “it’s not a catastrophe for India".
The two countries are negotiating a deal, which could be announced by year-end, according to reports, removing the
overhang–already baked into Morgan Stanley’s 2026 base case. Foreign investors will react positively, and the Nifty may
see a pop, but it doesn’t change India’s strong secular story, Desai said.
India’s large and diverse consumer base remains a key driver for multinationals and a catalyst for the revival of
manufacturing in defence, semiconductors, shipbuilding and electronics, according to Desai. Services exports offer
massive potential where India’s share could double in 10 years, he said.
Desai indicated that consumer companies and lending businesses are well-positioned, energy infrastructure offers
long-term opportunities, and banks and information technology (IT) services remain key plays for foreign inflows, with
IT set to benefit from AI. For retail investors, he suggested, the focus remains long-term investing and steady