Sensex at 200,000? Possible in 10 years, says Raamdeo Agrawal

If market experts are to be believed, this is just the beginning of a major bull-run for India’s stock market. Healthy growth in corporate profit for the next few years, coupled with favourable demographics can take the indices to stratospheric levels in the years ahead. 

Raamdeo Agrawal, co-founder and joint managing director, Motilal Oswal Financial Services (MOFSL) has said in a May 27 note that he expects the S&P BSE Sensex to hit the 200,000 mark in the next 10 years – up nearly 4 times (4x) from the current level of around 51,500 – and advises investors ‘not to bet against India.’

For the S&P BSE Sensex to achieve this monumental feat, Agrawal expects corporate profits to grow at 15 per cent on compounded annualised basis (CAGR) for the next 10 years – a tad higher than the country’s gross domestic product (GDP), which he pegs at 12 – 13 per cent (nominal GDP). Market return going ahead, he believes, will be in line with growth in corporate profits. 

In the last 10 years, the S&P BSE has given a modest CAGR return of 10 per cent – from 19,445 levels in March 2011 to 49,509 levels in March 2021, Agrawal said. During this period, market has taken crises like demonetisation, the ILFS fiasco and Covid in its stride. During this period, the Indian economy, according to him, has grown at a CAGR of 4 per cent – from 1.7 trillion in 2010 to 2.6 trillion in 2020E, as compared to China that has grown at 10 per cent CAGR to 13.2 trillion in 2020E. By 2029, he expects the Indian economy to reach the $5 trillion mark.

Graphic: The road to 200,000

“Trebling of per capita GDP implies 10x opportunity in discretionary and 4x opportunity in savings and investment services,” he said.

Besides Agrawal, some other market experts and pundits have earlier forecast six-figure levels for the S&P BSE Sensex. Back in 2017, Mark Galasiewski of Elliot Wave International had reiterated that he expects the S&P BSE Sensex to hit the 100,000 mark by 2024. The index was at 30,750 levels then. In 2014, Varun Goel, then head of portfolio management services at Karvy predicted the S&P BSE Sensex would hit the 100,000 mark by calendar year 2020 (CY20). READ ABOUT IT HERE 

Ace investor Rakesh Jhunjhunwala, too, had called the market rally 'the mother of all bull run' some years ago.

Meanwhile, Agrawal of Motilal Oswal suggests that the government now needs to aggressively divest its holdings in public sector enterprises. The government, he said, should clear all 'blockades' for the divestment process, focus on job creation and kick-starting growth.

Covid, he believes, is now a 'known beast' with vaccination marking the beginning of the end of the pandemic. He expects a K-shaped recovery where larger businesses will recover faster from the impact of the pandemic.

Investment strategy

As an investment strategy, Agrawal suggests investors opt for ‘value migration’, where value (i.e. profits & market-cap) migrates from outmoded business design to superior business design. Value migration, he believed, creates a huge opportunity for sectors that see value inflow.

Telecom, information technology (IT), private banks, private life insurance, according to him are the ones to bet on. 

The other theme he is bullish on are the 'open-up plays' - i.e. the sectors that will benefit from the economy opening up after the Covid impact. These sectors, he believes, are likely to see pent-up demand get released. These include autos, consumer durables, paints and selective industrials.