Sensex likely to scale 100k level in 4 years

We expect Indian equities to deliver over 14% returns in the future, thanks to strong drivers such as a robust macroeconomic environment, healthy corporate profitability, rising domestic investment into the equity market, the high attractiveness of Indian equities to foreign investors, and a close to fair valuation. As a result, we expect the Sensex to reach 1,00,000 within the next 3to 4 years - Anand Rathi, Chairman, Anand Rathi Group, tells Bizz Buzz

Ongoing Economic Upcycle

• On average, Sensex generated a yearly return of 14%
• BSE mid-cap &small-cap indices rose 44.7% & 46.7% respectively
• Inflationary pressures impacting demand in mass market and rural segments
• A moderation in inflation could support a recovery in the mass market segment
• Margin expansion driving earnings growth in recent qtrs
• Broad-based demand-led volume growth could support earnings growth in 2024

Mumbai: Sensex is likely to cross the mark of 1,00,000 mark in next three to four years, experts have predicted. Key triggers to decide market direction in 2024 will be demand pickup in mass segment and private capex revival. BSE Sensex on last Friday (January 12) closed 847.27 points or 1.18 per cent higher at 72,568.45 points.

Demand in mass market and rural segments remain muted since the pandemic due to inflationary pressures. A moderation in inflation could support a recovery in the mass market segment, further strengthening the ongoing economic upcycle. While the earnings growth in recent quarters was driven by margin expansion, volume growth driven by broad-based demand could support earnings growth in 2024. Volume recovery in rural focussed two-wheeler sales indicate green shoots in rural consumption, experts explained.

Most of the recent capex was driven by government sector. As per RBI survey, capacity utilisation in manufacturing sector is near a healthy level of 74-75 per cent. Buoyant demand environment along with a pickup in utilisation could strengthen the private capex trajectory. Private capex is showing early signs of revival. As indicated in the below graphs, share of private sector in new project announcements has meaningfully improved, they said.

Talking to Bizz Buzz, Anand Rathi, Chairman, Anand Rathi Group,said: “On average, the Sensex has generated a yearly return of 14 per cent. We expect Indian equities to deliver similar returns in the future, thanks to strong drivers such as a robust macroeconomic environment, healthy corporate profitability, rising domestic investment into the equity market, the high attractiveness of Indian equities to foreign investors, and a close to fair valuation.”

As a result, we expect Sensex to reach 1,00,000 within the next three to four years, he said.

Arun Kejriwal, founder at Kejriwal Research & Investment Services,said, “If one is to look at the long-term return at Sensex, one can expect this psychological numbers to take anything between three and four years to achieve.”

There is already a big move in the market, post Assembly elections in the five States last year. To elaborate it, there is a kind of semi euphoria which is prevailing in the market. However, things like this are never sustainable, he said.

Market is likely to remain volatile with an upward bias until middle of May before the results of the ensuing general elections are declared. After that, market will enter the range-bound zone and it may turn lacklustre. After the election results, a euphoria like situation may prevail in the short-term.

Reaching one lakh crore mark is a psychological figure for which the market has to go 35 per cent up from its current level.

According to Kejriwal, “again, the last calendar year was an extra-ordinary year with the markets gaining 18.5 to 20 per cent. This in itself was exceptional. To expect this to be repeated in the current calendar year is a tall order.”

The 2023 defied the consensus view of moderate equity returns given the background of rising global interest rates, limited scope for valuation expansion and elevated crude prices amid geo-political tensions. The Sensex delivered a total return of 19.1 per cent, majorly supported by earnings growth, says a study by the two fund managers of Quantum AMC, including George Thomas and Christy Mathai.

BSE midcap and BSE smallcap indices delivered returns of 44.7 per cent and 46.7 per cent respectively. Returns in large and mid-cap indices were majorly driven by earnings growth with flattish earnings multiple. This is indicative of the strengthening of the earnings upcycle which commenced in FY22.