India sitting on tsunami of equities; Nifty to double in 5 years: Raamdeo

BS BFSI Insight Summit 2023: India is an extremely well explored market. What concerns me is buying a stock at a reasonable valuation, he said

Taking a bold call at the Business Standard BFSI Insight Summit, Raamdeo Agrawal, chairman and co-founder, Motilal Oswal Financial Services said on Tuesday that the benchmark Nifty50 index could double over the next five years, and may swell 4-times (4X) in 10 years.

"India is in a different cycle right now where we are seeing corporate upgrades. The aggregate earnings of India Inc, thus far in the July to September quarter (Q2FY24), have increased 32 per cent as against our expectation of 26 per cent. India is on a roll. The index can double in the next five years from here on, and surge 4x in 10 years," Agrawal said.

The benchmark S&P BSE Sensex hit a record high of 67,927 on September 15, 2023. The Nifty50, meanwhile, touched 20,222 levels the same day.

However, a rise in US Treasury yields and an unexpected war in West Asia has pushed the index nearly 6 per cent down since then.

Investors, Agrawal added, are not factoring in net profit growth in the coming quarters.

"Commodity costs are falling, which has driven volume growth this year rather than revenue growth. Markets have, so far, not priced in better bottomline growth ahead," he said.
 

Agrawal said every market faces challenges, especially the ones which are unknown. Investors don't have control over global challenges.

"But, what we have control over is the earnings growth. We look at corporate earnings 90 per cent of the times, while global factors are just 10 per cent. So, my focus is always on what is the profit that a company is generating, and what is its expectation," Agrawal added.

The real challenge, however, is to find such a company at a reasonable price. "India is an extremely well explored market. What concerns me is buying a stock at a reasonable valuation," he said.

Debt or equity?

That said, Agrawal believes equities are the only way forward for Indian investors as it has immense potential to generate wealth.

"India is sitting on total savings worth $10-12 trillion. This number has the potential to grow to $100-150 trillion in 25 years. Markets will discount this value at some point. So, markets are sitting on a tsunami of savings," Agrawal said.

Add to this, India is seeing three million dematerialised (demat) accounts per month. From 3 million demat accounts during the pre-Covid era , India's demat tally has reached 130 million.

This number has the potential to grow to 500 million in 10 years. I believe India is sitting on a tsunami of equities, Agrawal added.

"So the synergies from equities, credit flow, and fantastic entrepreneurs in India are all set to benefit the Indian markets," he said.

The benefits of rising yield, he said, was more accrued towards the US markets where yields have hardened from barely 1 per cent to 5 per cent.

"India, historically, had yields in the range of 5-6 per cent. They are at 7 per cent now. So, I don't think returns from Indian debt markets have turned attractive," Agrawal added.