Indian stock markets may rise in Q3 FY26

Mumbai

Morgan Stanley, a global financial firm, said on Friday that Indian stock markets are more likely to go up than fall in the third quarter of financial year 2026 (Q3 FY26), starting in July. The firm remains positive about India’s economic outlook and expects growth to continue.

The note highlights strong government spending, easing inflation, and signs of a supportive policy shift from the Reserve Bank of India (RBI). These factors together create a good setting for market growth. Morgan Stanley believes that if interest rates fall, banks may lend more, which would help businesses grow and lead to more economic activity.

The upcoming corporate earnings season could also boost the market. The firm expects many companies to report better-than-expected profits due to last year’s lower base, cost control, and steady consumer demand.

Looking ahead, Morgan Stanley predicts the RBI might reduce interest rates by 25 basis points in the fourth quarter. This would further support stock market sentiment.

However, global events still pose risks. Conflicts, trade issues, or slowdowns in large economies could negatively affect Indian stocks. For example, a sudden fall in oil prices might signal global trouble, which could hurt investor mood.

Despite these risks, strong support from retail investors and continued foreign interest are likely to reduce any losses. Long-term reforms such as GST improvements and infrastructure projects add to investor confidence.

Although Indian stock valuations are higher than usual, the firm believes this is fair due to strong earnings prospects. Morgan Stanley concludes that India remains one of the top emerging markets thanks to stable policies and high growth potential.