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44,000 on Sensex: Where is the index headed - 50,000 or 100,000?

We see Sensex at 45,000 before 2020 and 50,000 in 2021 are possible if this momentum continues. Over the past 10 Samvats, Sensex has given a 7.57 % compounded return and in Dollar terms, say experts.
Nov 17, 2020 / 01:04 PM IST

After a roller-coaster October, November started on a robust note when the S&P BSE Sensex not just climbed above 42,000 to reclaim previous record highs but went on pushing the boundaries towards 43,000 and then on November 17 it hit 44,000 in early trade.

Indian market witnessed a steady rise after hitting a 3-year low back in March. Investors’ wealth in terms of the average market-capitalisation of the BSE-listed companies rose by about Rs 40 lakh crore since April.

The rally which was narrow in the beginning largely focused on few sectors could become more broad-based in the near future, suggest experts. The momentum will soon take Sensex towards 50,000 in 2021, and possibly 100,000 by 2024, they say.

“We see Sensex at 45,000 before 2020 and 50,000 in 2021 are possible if this momentum continues. Over the past 10 Samvats, Sensex has given a 7.57 % compounded return and in Dollar terms, a paltry 2.09%,” Dipan Mehta, Director at Elixir Equities Pvt. Ltd told Moneycontrol.

“Mean returns are at 12-14%. Over the next 2-3 years exceptional returns can be expected so that there is reversion to mean returns,” he said.

A media report suggested that a global brokerage firm, Morgan Stanley has upgraded its target for Sensex to 50,000 by December 2021 from an earlier target of 37,300 for June 2021.

“The global investment bank feels that the coming growth cycle is not fully priced in, hence there is more upside to the index. It has an overweight rating on India,” it said.

What is driving the rally on D-Street? Well, global liquidity is one factor which is driving the momentum, apart from that the recent policies and measures introduced by the government as well as strng micro and macro data has also made investors more confident about the investment climate.

FPIs invested a net sum of Rs 29,436 crore into equities and Rs 5,673 crore into the debt segment between November 2-13. FPIs had invested a net sum of Rs 22,033 crore in the preceding month.

“The FII flows into India are likely to have been driven by better than expected earnings growth, reform announcements in important sectors like labour and agriculture and improving risk sentiment,” R Venkataraman, MD, IIFL Securities Ltd told Moneycontrol.

“While the global liquidity is expected to remain benign, the FII flows to India would depend on execution of reform announcements and sustaining the recent improvement in economic data,” he said.

A price and time consolidation of almost three years, global stimulus ensuring seamless capital flow to EMs, low cost of capital, benign commodity and crude inflation, and US Dollar’s sideways or downward direction, suggest experts.

“There are a couple of strong growth enablers: one, India’s robust rural market in general, and two, the potential market share gain in global manufacturing stemming from the anti-China sentiment,” Amar Ambani, Senior President and Head of Research - Institutional Equities at YES SECURITIES told Moneycontrol.

“We, therefore, believe that the market will run up ahead of, and in anticipation of, an ensuing economic recovery. Annual market-level targets are always tricky to call. But given the structure of the market, my sense is that Sensex will hit the 100,000 mark by the year 2025,” he said.

Nifty Outlook:

Global brokerage firm Nomura is of the view that Nifty may hit the level of 13,640 by December 2021. The upside risk to the target multiple in the near-term remains, on the back of strong capital flows.

"Factoring in 4-5 percent risk to FY22/23 consensus earnings estimates and using 19 times on December-22 earnings, we arrive at December-21 Nifty target of 13,640, implying upside of 7 percent from the current levels,” it said.

Recently, Goldman Sachs upgraded India to 'overweight' and raised Nifty50's target to 14,100 which it expects by 2021-end. The market has moved higher as investors gained confidence on improving economic momentum, Goldman Sachs noted in the report.

Disclaimer - The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Nov 17, 2020 01:04 pm
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