Morgan Stanley has implemented significant price target reductions across a portfolio of India's prominent internet and technology companies, signaling concerns about the sector's near-term prospects. The global brokerage has cautioned that the earnings downgrade cycle is far from over, driven by slowing growth, rising competition, and persistent margin pressures across the digital economy landscape.

Revised Price Targets Across Key Stocks

The brokerage has made substantial adjustments to its price targets across multiple companies in its coverage universe:

MakeMyTrip experienced the most dramatic reduction, with its target price cut by $65, representing a significant reassessment of the online travel platform's valuation prospects.

Quick Commerce Momentum Expected to Moderate

For the December quarter (Q3FY26), Morgan Stanley projects a deceleration in quick commerce growth dynamics. Net order value growth is anticipated to slow quarter-on-quarter, with Eternal expected to achieve approximately 16% growth and Swiggy projected at 13-14%, both representing significant moderation from the previous quarter's stronger performance.

Despite expected sequential improvements in adjusted EBITDA losses as a proportion of gross order value, absolute losses remain substantial:

The brokerage has trimmed its quick commerce estimates while maintaining its preference for Eternal over Swiggy, citing stronger execution capabilities and continued relative market share gains.

Travel and Logistics Sector Challenges

MakeMyTrip is expected to deliver steady growth but face margin compression. Adjusted revenue growth is projected at approximately 19% year-on-year in constant currency terms. However, increased advertising and marketing expenditure—rising to about 5.2-5.3% of gross bookings—is likely to pressure adjusted EBIT margins to 16.6%, down from 17% in the previous year. Morgan Stanley has incorporated a more gradual margin recovery trajectory and reduced its adjusted EBIT estimates for FY27 and FY28 by around 5% each.

Logistics player Delhivery continues demonstrating robust volume growth, with express parcel growth estimated at 35.50% year-on-year and revenue growth accelerating to 18%. However, higher costs associated with regulatory changes and investments in new business segments have prompted the brokerage to trim EBITDA forecasts across FY26-FY28.

Broader Sector Outlook

Beyond the major players, Morgan Stanley highlighted sustained growth at Blackbuck and steady expansion at Urban Company. However, the brokerage cautioned that regulatory changes affecting gig workers and intensifying competitive pressures could weigh on profitability across the entire sector. The firm expects further consensus estimate cuts across its coverage universe, even as valuations for select stocks begin to appear more reasonable.

Morgan Stanley anticipates a significant resurgence in Indian stock markets, with equity strategist Ridham Desai highlighting that stock valuations have turned favorable relative to bonds and short-term rates for the first time in nearly five years. The global brokerage has set an ambitious Sensex target of 95,000 by December 2026, representing approximately 13% upside from current levels.

Favorable Valuation Turn After Extended Period

In his latest strategy report, Desai notes that India's trailing 12-month equity performance represents the worst in the country's recorded history on a relative basis. However, this creates a compelling opportunity as valuation metrics approach past trough levels that have historically preceded strong market phases.

Morgan Stanley's analysis indicates that key relative gauges comparing equity valuations with short-term interest rates have "turned up" after several years, implying stocks are now inexpensive versus cash and bonds.

Earnings Growth and Macro Support

The investment bank expects a "sharp turn" in earnings growth, forecasting Sensex earnings to compound at 17% annually through FY28 in the base case scenario. This optimistic outlook is supported by an explicit reflation effort from the Reserve Bank of India and government initiatives.

Multiple macro indicators that historically lead equity returns have swung into positive territory, including bullish yield curve steepening, rising money multiplier, and widening gap between nominal GDP growth and policy rates.

Target Scenarios and Strategic Positioning

Morgan Stanley's December 2026 base-case Sensex target of 95,000 embeds a trailing P/E of 23.50 times, modestly above the 25-year average. The firm has also outlined alternative scenarios based on varying market conditions.

Sector Strategy and Investment Approach

The brokerage recommends focusing on domestic cyclicals over defensives and external-facing sectors. Foreign portfolio investor exposure to India has weakened over the past four years, making the market a potential "pain trade" if global funds rotate back.

Morgan Stanley's composite sentiment indicator, combining flows, volatility, breadth, and momentum, has moved into the buy zone - historically a contrarian signal preceding above-average returns. The structural case for valuation re-rating rests on falling oil intensity in GDP, rising export share in services, and ongoing fiscal consolidation supporting lower real rates and reduced macro volatility.