India’s benchmark stock index BSE Sensex to hit the much-anticipated 100,000 at some point in late 2026, expects Christopher Wood, global head of equity strategy at Jefferies. Wood said his target is assuming a trend of 15 per cent EPS growth and is on a five-year view. Although Chris Wood said that his target for the benchmark index may seem as an “aggressive assumption”, he added that it “is now eminently achievable on a five-year view assuming a trend 15 per cent EPS growth and that a five-year average multiple of 19.4 is maintained”.
India should be the prime object of focus of growth-oriented equity, he said adding that he will maintain the domestic demand focus in his long-only India portfolio. Currently, the Sensex is at 58,669 points, implying that it could rise as much as 70 per cent in the next five years or in other words clock an annual rate of 11 per cent.
Any correction in global markets as a result of the US Federal Reserve’s monetary policy action should be used as an opportunity to buy into Indian equities, he said. “Still GREED & fear hopes that the Indian macro story will prove to be more resilient to a rising oil price than has been the case in previous cycles,” Wood added.
Although domestic markets have seen a sharp correction recently, Wood remains confident. Foreign investors have sold $4.8 billion of equities year-to-date. “But the market would have suffered much more were it not for continuing healthy inflows into domestic mutual funds. Net inflows into domestic equity mutual funds totaled $9.3 billion in 4Q22 and $22.2 billion since March 2021,” he added.
Indian stock markets, in Chris Wood’s view, may prove to be surprisingly resilient in the face of rising interest rates. He draws this conclusion from seeing the housing cycle that picked up after a seven-year downturn. “This should translate in due course into a broader capex cycle which should be earnings positive and mean the stock market will prove to be surprisingly resilient in the face of rising interest rates,” he said. Stamp duties on a country-wide level are up 59 per cent on-year in April-November — a strong indicator of the improvement in the broader housing/property cycle.
On Corporate Earnings
On the earnings front, the Jefferies global equity strategist expects strong growth. Wood said that the consensus earnings growth forecast for the MSCI India this year is 20.3 per cent and Jefferies’ India office is forecasting 19.2 per cent earnings growth for Nifty next fiscal year.
Union Budget 2022
Speaking about the Union Budget 2022, Central government capital spending is budgeted to rise 17 per cent YoY after this fiscal year’s estimated increase of 14 per cent YoY. As a result, the central government’s capex to GDP will increase from 1.6 per cent to 2.9 per cent over the three-year period from FY20 to FY23," the note said.
The projected fiscal deficits of the central government for this fiscal year and next are 6.9 per cent and 6.4 per cent of GDP respectively. “This might seem high but GREED & fear is relatively relaxed given the deficits are being driven primarily by investment related capex. It is also the case that the budget may be too conservative on revenues as has proved to be the case so far this fiscal year," the note said.
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