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Forecasting a sharp recovery in 2026 after the market posted its weakest relative performance against emerging-market peers in over three decades, Morgan Stanley has turned bullish on Indian equities.

In a recent strategy report, Morgan Stanley noted that Indian stocks have hit an inflection point and are ready to “regain their mojo” over the next 12 months, driven by supportive policy shifts, attractive valuations and a structural domestic bid that remains in place.

From Deep Underperformance to Potential Outperformance

The numbers tell a stark story. India is closing 2025 with its worst relative return versus emerging markets since 1994, a painful stretch that began in the second half of 2024 when growth slowed and valuation

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