We believe that the probability of the Sensex peaking at 50,000 or more in the current bull market is high, says Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking.
Experts believe that the bull run in the market can continue in the lomg term with Sensex hitting 50,000 or going beyond in the next decade. This should bring some cheer to the investors.
Last week, Morgan Stanley said in a report that the bull run in the Nifty and Sensex, which began in March 2009, just completed its 10th year.
This has been India’s longest and slowest bull run with a CAGR of 16 percent over 10 years. The global investment bank in its base case scenario expects the index to touch 42,000 by December 2019. At that level, the BSE Sensex would trade at a forward P/E of 20x, slightly higher than the 25-year trailing average of 19x.
“We believe that the probability of Sensex peaking at 50,000 or more in the current bull market is high. One note of caution is that the Indian market is correlated to global markets, and the global business cycle is maturing,” Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking told Moneycontrol.
“The probability of a global recession in 2020 cannot be dismissed and thus some caution would be warranted by mid-2020,” he said.
Dipan Mehta, Director, Elixir Equities is of the view that foundation is being set for the next leg of this multi-year bull market. “We should see 50K on the Sensex in the next decade and maybe even 1,00,000 before 2030,” he said.
Apart from global concerns with respect to growth, on the domestic front, at least in the near-term, there are lingering concerns about upcoming elections that have put investors in a fix.
Mutual fund data of past month suggests that retail investors are on sidelines as inflows into equity mutual funds fell to a 25-month low in February.
But, it is not the time to slow down your investments into funds or into market because the liquidity rush from foreign investors is supporting the bull market rally, suggest experts.
And, the optimism is not based on elections or one particular government resuming power, but it is more fundamental in nature.
Ahead of the elections, foreign investors have developed an appetite for Indian equities. FIIs bought equities worth over Rs 20,000 crore so far in 2019.
"Indian equity market continued its positive momentum with both mid and small-cap stocks being the biggest gainers. Reduced geopolitical tension, a possibility of stable government, strengthening rupee and recent FII buying has supported the turnaround in the market," Siddhartha Khemka, Head of Retail Research, MOFSL told Moneycontrol.
"The Indian economy and earnings are improving as we step into FY20. We also expect the RBI to cut rates further in its April policy meeting. Our analysis of fundamentals and valuations for midcaps and comparison of mid-caps versus large-caps on several frontiers suggest that the relative attractiveness of midcaps has gone up," he said.
Data suggests that the Indian market is not dependent on which political party is ruling at the Centre. The BSE-30 index increased 305x over the period of January 1, 1980 to December 31, 2018, according to Quantum Mutual Fund a note.
“The returns of the BSE-30 Index are completely independent of which kind of government is in power. The highest returns from the BSE-30 index have been under coalition governments - and the lowest returns also under coalition governments,” the note added.
“But, it is also true that under three of the four single party governments, the rate of return on the BSE-30 index has grown more than the 39-year average of 19.3 percent,” it said.
The equity team at Quantum firmly believes that India is a long-term growth story and continues to pick stocks using the deliberate investment philosophy - irrespective of who is in power.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.