Even as Sensex and Nifty have returned over 20% so far in this year, experts don't believe that this rise could suddenly come to a stop any time soon.
Indian stock markets made fresh highs again today, with benchmark Sensex rallying 170 points to 31,885 points intraday, and broader NSE Nifty rising 60 points to 9,830 points. With this, Nifty took another leap today to hit the crucial level of 10,000 points.
Observing the trends from the past one year, it is perhaps remarkable that both Nifty and Sensex continue their upward climb despite the shock move of demonetisation of Rs 500 and Rs 1000 currency notes by Prime Minister Narendra Modi late last year. Both the major indices, BSE Sensex and NSE Nifty have rallied about 20% so far this year.
A lot of factors seem to have come into the play: Good rainfall, expectation of strong corporate earnings, implementation of GST with no more than expected troubles, and resilient economic growth, which is expected to top that of China for the next 10 years. While some confusion among middle and small enterprises still persists, GST implementation has remained broadly uneventful, without major disruptions reported around the corporate landscape.
So, should one be worried about the meteoric rise in Indian equities suddenly coming to a halt? Most experts don’t think so.
“Markets are looking very good. On FY19 (forward) earnings, markets are still trading at 16 times,” Yogesh Nagaonkar, Fund Manager, Bonanza PMS, said in an interview with FE Online on Tuesday, pointing out to the attractive valuations. Further, he said that good quality companies will continue to attract higher valuations. Nagaonkar is bullish on Indian equity markets for near term. “We don’t see any macro concerns,” he said, adding that one should add good quality companies in the portfolio.
Nagaonkar pointed out to strong outlook for banking companies, specially PSU banks, given the recent government thrust on resolving the problem of bad loans and fixing these lenders balance sheets.
10000 is nothing. Think bigger
Of late, several market experts have expressed their bullishness on Indian markets, not only for the short term, but for the long term as well. Earlier last month, Ridham Desai, MD, Morgan Stanley, said in an interview with CNBC-TV18 that he expects the index to reach 30,000 points — that’s for NSE Nifty, not for BSE Sensex — in the next five years, on the back of renewed consumption, greatly improved exports and infrastructure spending by the government, This roughly works out to a CAGR of 25.33% for the Nifty over the next five years.
“We are in the midst of a cyclical recovery in the economy which is good for earnings. The market will not go up in a straight line but it is safe to assume that it is a well-entrenched bull market, and there is considerable more upside for the long-term investor,” Ridham Desai had said then.
From a technical point of view, brokerage firm CLSA had said in March 2017 that it expects NSE Nifty to hit 10,300 points once the index breaks through the levels around 9,000 points. “We ultimately believe that this 9,000 area, we will break through that and make new all-time highs,” CLSA’s Global Technical Analyst Laurence Balanco had said in a TV interview. The brokerage has a first target of 10,300 points on Nifty with the support at the levels of its December lows, Balanco had said.