Mumbai, March 4 (NationPress) While Indian stock markets may appear fragile at first glance, this period presents a compelling buying opportunity for long-term investors, according to a report released on Wednesday.

Global brokerage firm Morgan Stanley asserts that the fundamental structure of the Indian economy remains robust, with corporate earnings growth expected to gain momentum leading into 2026, despite current market volatility.

The report indicates that Indian equities are responding more intensely to negative news compared to positive updates, which has led to investor skepticism regarding potential structural issues.

However, Morgan Stanley counters this perspective, attributing the market's weakness to positioning and technical factors rather than underlying economic distress.

As per the findings, corporate earnings are already on the rebound after a six-quarter slowdown and are anticipated to accelerate into 2026.

This recovery is expected to be bolstered by reflationary measures from the Reserve Bank of India and government policies.

Actions such as interest rate reductions, bank deregulation, liquidity injections, sustained capital spending, tax relief initiatives, and a relatively growth-friendly budget are all contributing to a more favorable macroeconomic landscape.

The brokerage noted that the stringent policies implemented post-Covid have now loosened, fostering an environment more conducive to growth.

Additionally, the report highlighted that trade agreements and improving ties with China have further enhanced the optimistic outlook.

The Indian rupee is considered undervalued, and strong domestic investor inflows provide stability to the market.

Despite these favorable indicators, stock performance has not met expectations, with trailing 12-month returns being historically low and relative valuations near previous lows.

The report observed that India's share of global corporate profits significantly exceeds its representation in global indices, and the Sensex is currently trading at historically low levels when benchmarked against gold. Furthermore, foreign portfolio investor (FPI) positions have deteriorated in recent months.

Morgan Stanley attributes this recent lag to escalating geopolitical tensions in the Middle East.

Although India's dependence on oil imports has lessened compared to prior years, any uncertainties in oil supply chains or production still impact investor confidence.

The lack of a distinct artificial intelligence (AI) theme within the Indian markets has also hampered performance, as global investors seek AI-related stocks elsewhere. Some investors are apprehensive about the potential disruptions AI could cause to India's service exports.