According to market analysts, India’s stock market is just getting off on a big bull run. Healthy corporate profit growth over the next few years, combined with favourable demographics, could propel the indices to new heights in the coming years. In a May 27 note, Agrawal, co-founder and joint managing director of Motilal Oswal Financial Services (MOFSL), predicted that the S&P BSE Sensex will reach 200,000 in the next ten years, up nearly four times (4x) from its current level of around 51,500, and advised investors not to bet against India. Agrawal expects corporate profits to rise at a compound annualised rate (CAGR) of 15% over the next ten years, slightly higher than the country’s GDP, which he estimates at 12–13%. (nominal GDP). He assumes that future market returns will be in line with corporate profit growth.
According to Agrawal, the S&P BSE has returned a modest 10% CAGR over the last ten years, rising from 19,445 in March 2011 to 49,509 in March 2021. During this time, the market has weathered crises such as demonetisation, the ILFS debacle, and Covid. According to him, the Indian economy grew at a CAGR of 4% from 1.7 trillion in 2010 to 2.6 trillion in 2020E, while China’s economy grew at a 10% CAGR from 13.2 trillion in 2010 to 13.2 trillion in 2020E. He expects India’s economy to hit $5 trillion by 2029.
Several years ago, investor Rakesh Jhunjhunwala dubbed the market rally “the mother of all bull runs.
” According to Motilal Oswal’s Agrawal, the government now needs to vigorously divest its public-sector assets. He said the government should remove all ‘barriers’ to the divestment process and concentrate on job creation and development.
He argues that Covid is now a “well-known beast,” with vaccination signalling the start of the pandemic’s end. He predicts a K-shaped recovery, with larger companies recovering faster from the pandemic’s effects. As an investment strategy, Agrawal advises investors to pursue ‘value migration,’ in which value (i.e. income and market capitalization) migrates from outmoded to superior business models. He assumed that value migration presents a tremendous opportunity for sectors that experience value inflow. Telecom, information technology (IT), private banks, and private life insurance, he believes, are the sectors to invest in. the industries that will benefit from the economy’s reopening as a result of the Covid effect. He expects that pent-up demand will be released in these industries. Automobiles, consumer durables, paints, and select industrials are among them.
