New Delhi: India has been “remarkably resilient" in the recent turmoil in emerging market equities largely driven by macro stability, low policy uncertainty, improving growth and domestic flows, according to a Morgan Stanley report.

Though foreign investors have trimmed their stake, the domestic equity market’s out performance could cause FPI flows to return, brokerage added. “Domestic equity flows are in the middle of a structural uptrend and though FPIs trimmed their India weight to 2011 lows, India’s outperformance could cause FPI flows to return," Morgan Stanley said in a research note.

Morgan Stanley in its base case (50% probability) expects the Sensex to touch 36,000 in June next year, while in the bull case (30% probability) it could be at 44,000, and in the bear case (20% probability) it could be at 26,500. The Sensex is currently hovering around 38,000, and has jumped over 11% so far this year.

“India’s policy environment has defied expectations and remained relatively benign despite the coming elections in 2019," Morgan Stanley said. The Reserve Bank of India’s commitment to keep real rates positive was also aiding sentiment, it added.