The Indian stock markets may well be quite volatile with a downward bias currently, but there are enough green shoots that could see the benchmark Sensex touch 70,000 by the end of 2023.
According to Mark Matthews, Head Research Asia at Julius Baer, factors like strong domestic fund flows, return of foreign portfolio investors (FPIs), and valuation premium in line with historical averages could see the 30-share Sensex gaining nearly 9,800 points or a little over 16 per cent during the current calendar year to touch 70,000.
“As of December 2022, domestic institutional ownership continues to remain at record highs (13.7%), as domestic institutional investors pour money into the Indian markets on the back of strong retail participation via monthly Systematic Investment Plans. Encouragingly, foreign institutional ownership has also started bouncing back from decade lows,” says Matthews whose firm has an ‘overweight’ stance on India.
Data from NSDL shows that FPIs have been net buyers of Indian equities at nearly ₹9,200 crore in the current month till March 6. This is on the back of net selling in the previous consecutive two months with the cumulative sales pegged at ₹34,146 crore.
Incidentally, the benchmark Sensex is up a little over 2 per cent – 2.12 per cent to be precise – in the current month till March 6. This was following three consecutive months of losses that saw the Sensex shedding more than 4,100 points or 6.6 per cent.
“Over the last four months, India’s valuation premium versus the emerging market (EM) peers retraced sharply from a high of 120% in November 2022 to its 10-year average of 70%, as the Chinese markets bounced back over 50% during the same period,” says Matthews.
“We believe that incremental foreign selling will decrease going forward due to valuation comfort, superior earnings growth versus EM peers, and the lowest decile foreign ownership,” he adds highlighting the fact that FPI ownership bounced back by 50 basis points, from decade lows of 18.4 per cent in June 2022 to 18.9 per cent in December 2022.
Interestingly, Matthews is not alone in his bullish outlook.
Last year, Jefferies’ Christopher Wood — the author of the widely-followed ‘Greed & Fear’ reports – said that he believes that the Sensex could hit the 1,00,000-mark during FY27 or sometime in late 2026 while assuming a 15 per cent EPS growth and a five-year average multiple of 19.4.
Around the time of the Union Budget in 2021, well-known market expert Raamdeo Agrawal, co-founder of Motilal Oswal Financial Services, had said that the Sensex would hot 2,00,000 in 10 years.
In November 2022, during the sidelines of a capital market conference, Amar Ambani, Group President and Head of Institutional Equities at YES Securities, said that the Sensex may hit the 1,00,000 mark in 3.5 years. In the same conference, Anil Rego, founder and CEO of Right Horizons, had said that the benchmark index may hit the 1,00,000 mark in 3-4 years.
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