'Sensex may touch 50k in a decade'

Market overvalued at current levels? No way, says a report by JM-Morgan Stanley, as it stretches its Sensex target to over 50,000 in 13 years or by 2020.

"One way of looking at market valuations is to find out the number of years it could take the market to reach a certain level. In our base case, the BSE Sensex (used as a market proxy) could take almost 13 years to breach 50,000 from its current level. If the assumptions are optimistic, the period to 50,000 shrinks to under 10 years," the latest report by the reputed brokerage-cum-investment banking house predicts.

The critical success factors for returns and hence the period to reach 50K include some obvious ones such as GDP growth, interest rates, the inflation rate and the success of India's infrastructure roll-out, it says.

A less obvious but increasingly accepted factor is global risk appetite, which has a bearing on the expected rate of return and hence the actual rate of return.

Some of the least obvious factors include the pace at which the Indian companies globalise, the rate of wage increases, the investment rate, the estimated asset life in the books of accounts and capital structure alterations.